- The Washington Times - Wednesday, October 4, 2006

Americans born between 1946 and 1964 — baby boomers — are 75 million people in their peak earning years with equity in their homes and low interest rates at their fingertips. In 2005, they accounted for four out of every 10 second-home purchases, a record high, according to a recent report by the National Association of Realtors (NAR).

Boomers are looking to second homes for leisure, retirement and investment, but they are looking for other attributes, too.

NAR credits the Taxpayer Relief Act of 1997 for increases in second-home sales. The tax law permits married taxpayers who file jointly to keep, tax-free, up to $500,000 in profits on the sale of their principal residence, provided they have lived there two of the previous five years.

The same benefits are attached to second homes, except you may sell only one home during a two-year period.

“Since 1997, real estate has outperformed virtually every other investment vehicle,” says Ron Peltier, president and chief executive of HomeServices of America Inc.

Second homes are sometimes places where long-distance families get together in a central location or places for physical activity — skiing, snowboarding, water skiing. The NAR reports that second-home buyers want amenities such as a swimming pool, nature trails, boating and golfing as well as nice restaurants, nice shops and things to entertain children.

NAR’s chief economist, David Lereah, reported on the association Web site (www.realtor.org) that the typical vacation-home buyer last year was 52 years old with a salary of $82,800. A typical second home was about 200 miles from the owner’s primary residence. The median price was $204,100, up 7.4 percent from 2004.

Markets with a huge appreciation value on primary homes are providing funds for people to purchase second homes.

For instance, in Northern Virginia, some homeowners are opting to buy vacation homes with equity taken out of primary homes. Many homeowners who have seen their property values double and triple over the past five years are taking their equity and using it as a down payment for a second home.

Second homes provide a logical investment for boomers who have an eye on retirement but also want to keep their options open.

“In Ocean City, purchasers span different age groups, but they are mainly baby boomers. They might use [the Ocean City homes] a little in the off-season, but mostly they rent them out,” says Terri Moran, a Coldwell Banker Residential Brokerage Realtor in Ocean City who specializes in the condo market.

“Rental income helps buyers defray their monthly costs, including condo fees and taxes,” he says.

“I wanted to increase my investment portfolio,” says Michael Mason, owner of an Ocean City condo two blocks from the beach. “I’m only 53. Think what this will be worth when I’m 65.”

NAR reports that more than one-quarter of vacation homes will become primary residences after retirement and that nearly all second-home buyers consider their properties to be good investments.

“For the next 10 years, we expect an influx of baby boomers into the second-home market,” says Joe Kincaid, a broker for Wintergreen Real Estate Co. of Wintergreen, Va.

Three years ago, Leslie and Charles Hunt of Vienna purchased a second home in Wintergreen.

“We live less than two hours away, so we can go for the weekend anytime we want,” Mrs. Hunt says.

“Our investment has already increased its value by $60,000,” Mr. Hunt says.

Baby boomers don’t want the same vacation property their parents had. About two-thirds of the nation’s housing stock was built in the 1970s. Many boomers are buying newer, larger, more expensive vacation homes.

“The formula that a lot of people are using is a house where all the living is on one level,” says Steve Crandall, owner of Tectonics II Ltd., a builder at Wintergreen and in Central Virginia for more than 20 years. “Living rooms and dining rooms are out. Instead, people opt for the great-room concept, with an eating area that opens into a large common area.”

David and Maryanne Campbell have lived in the District for 18 years and just purchased a condo in an active-adult community in Delaware.

“We don’t need a formal dining room here,” Mrs. Campbell says. “We come here to relax and enjoy the view.”

“I would rather take a walk and read the paper,” Mr. Campbell says. “We needed a place to just relax.”

Second-home buyers will not pay the same interest for a second-home mortgage as they do a first. Mortgage lenders hold applications for second-home mortgages to a higher standard than a primary mortgage because a second-home mortgage is considered a bigger risk.

Buyers may expect to pay between a quarter-point and a half-point more on their interest rates.

“Apparently, such restrictions haven’t dampened the appeal of second homes,” Mr. Crandall says. “I’ve never seen anything like the past year in second-home sales.”

In rural Nelson County, Va., bordering Albemarle County to the southwest, builders have more than doubled new home construction since 2004. They were building 40 a year ago. Today, they are building more than 100.”

“If there has been one problem since 2004, it has been the lack of available [land],” Mr. Kincaid says.

In Albemarle County, builders have a hard time keeping up with the demand for country estates and green-pastured horse farms outside of Charlottesville.

“There are very few properties available,” says Steve Crandall, owner of Tectonics II Ltd., a builder at Wintergreen and in Central Virginia for more than 20 years.

“They’re baby boomers from Northern Virginia who are flush with a little bit of money in the bank,” says Richard Snow, a Realtor with Century 21 Battlefield Real Estate in King George County.

King George and Westmoreland counties in Virginia’s Northern Neck — the peninsula between the Potomac and Rappahannock rivers — have been getting attention from Washington-area second-home buyers, real estate agents say, although builder and Realtor Ben Hudson says second-homes sales in Westmoreland County are “cresting” this year.

Mr. Snow says the Westmoreland County town of “Colonial Beach, in particular, has something to draw in visitors nearly every weekend, whether it’s a boardwalk art show, fishing competition, festival, carnival, boat show, car show or crab feast. There are restaurants and cafes. Westmoreland County is rich with history.”

The majority of those who want a vacation home in the Fredericksburg area want to go fishing and boating. “Most of them realize they can’t get a second home on the water, but they want to be in a water-oriented community,” says Mr. Hudson, whose firm, Northern Neck Homes (www.nnhr.net), operates out of Montross in Westmoreland County.

“Second-home buyers are more budget-conscious than retirees when purchasing a second home,” Mr. Hudson says. “The slower market allows them time to find their perfect home.”

The median price for popular lakefront homes east of Fredericksburg is about $250,000, Mr. Hudson says.

Outdoor family fun persuaded Wayne and Linda Swank to purchase a second home in Colonial Beach.

Mr. Swank loves fishing, and Mrs. Swank loves the water.

“It’s a place to take the kids and be a family,” Mrs. Swank says.

“I love to unwind with my fishing pole,” Mr. Swank says.

However, there are boomers looking for vacation homes across the Potomac and Chesapeake, as well.

Don Sample, president of the Home Builders Association of Maryland based in Bethesda, reports on the association’s Web site that the second-home market in Maryland is robust, with Ocean City and Worcester County resort developments drawing the most interest (www.marylandhomeowners association.info).

“I want my kids to be entertained while I relax,” says new Worcester County resident Jeff Thompson.

Mr. Thompson, a divorced father of three, says he wants everything to do in one place. “It takes a lot of time to drive around from activity to activity; now we have time to be together,” he says.

West Virginia also is attracting its share of boomers. The U.S. Census Bureau reports that West Virginia is the sixth-fastest-growing destination for buyers of second homes. Pocahontas County, home to Snowshoe Mountain resort, has the most vacation homes in the state, according to Census Bureau figures.

West Virginia offers a rustic wooded retreat that’s not too far from the Beltway.

“My cabin in the woods allows me to become invisible,” says Elaine Fields, owner of a five-room West Virginia cabin built in the 1940s. “Quiet has become a real luxury to me.”

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