Vacation-home market has own rules

Back in the brightest days of the housing boom, it seemed as if vacation properties in such places as Rehoboth and Dewey Beach, Del., were literally flying off the market.”In 2004, prices were really appreciating rapidly,” says Chris Riss, real estate agent of Jack Lingo Realtor in Rehoboth, an area so popular with Washington-area residents that it has been dubbed the nation’s summer capital.

“But right now,” Mr. Riss says, “the psychology of the market change is that there is no appreciation in the short term.”

How accurate is market psychology? The days of multiple offers and metastasizing prices are gone, but a second home may still be a good investment in the long term, along with being a great place to stay on weekends.

According to a survey released in March by the National Association of Realtors (NAR), about one-third of all home buyers last year were purchasing second homes. While that number is down from the peak of the housing boom, it represents a return to historic norms that some experts say show market readjustment rather than stagnation or decline.

“It’s a typical cycle,” Mr. Riss says. “There’s been overreaction on all ends. In the long term, values and prices will still rise.” Also, a great beachfront property is a great beachfront property, whether it’s 2005 or 2008.

“There’s always interest in the beach,” says Walter Molony, a spokesman with NAR.

What has changed is the absence of those looking to make a quick buck - speculators - who helped drive the market boom.

“Speculative behavior is just not that normal,” Mr. Molony says. “Most people are buying second homes to live in them themselves.”

Vacation sales are back to traditional levels, and investment transactions are back to about where they were before the boom. The most popular second-home locations? Still the mountains or the beach, most real estate agents say.

Whatever your preferences, there’s always movement in the high-end housing market, which continues to enjoy record-level sales and prices.

For most people, the second-homes market is a bit different from the one driven by primary home buyers. For one thing, second-home buyers have more discretionary income. Also, of course, the vacation-home market itself is a discretionary one, so buyers who don’t need to purchase a property may delay large purchases during economic downturns.

Then there are those who purchase a second home now for full-time use later.

“The retirement market is hesitant just like everyone else,” Mr. Riss says, “but retirees are generally less concerned with what the house is going to be worth in five years.”

Sometimes, it pays to wait.

The median price of a vacation home was $195,000 in 2007, down 2.5 percent from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006.

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