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Where Have Vacation-Home Prices Dropped The Most?

If buying a vacation home has been on your “to do” list for some time, now may be the moment to take the plunge. Home prices have fallen drastically in many metropolitan areas popular with second-home buyers and renters, and rental demand has finally started to pick up along with the overall economy.
“If you are looking for a bargain, people are buying vacation homes at 50 cents on the dollar in Arizona, Nevada, and Florida,” says Tom Kelly, a syndicated newspaper columnist and the author of several books on real estate, including Real Estate for Boomers and Beyond. Those states all had rampant overbuilding before the housing market collapsed, and while they have seen some of the steepest price drops, there have been similar trends in other “vacation home” destinations, including Portland, Maine; Gulfport, Miss.; Cape Cod, Mass.; and cities up and down the West Coast.
Vacation-oriented areas that have seen the biggest declines in average single-family home prices since 2007 include Fort Myers, Fla., down 63%; Las Vegas, down 52%; Riverside, Calif., down 50%; Orlando, Fla., down 46%; Phoenix, Ariz., down 44%; and Miami, Fla., down 41%.
Many second-home buyers intend to rent their property out part of the time, so it makes sense to buy in a place where demand for vacation rental properties is on the upswing, Kelly says. “People are feeling better about going on vacation, so it’s getting easier to rent out a second home,” he says.
But if you’re buying a place that will double as a rental, you also need to consider seasonal issues that may affect demand for your property. “In Arizona, if you get a nice place close to a golf course, you know that you will be able to rent it out during the winter,” Kelly says. But Arizona’s not popular as a summertime destination. “In Florida, you pick up a couple of more months because of the water,” he says. “People love being around the water, even if it’s hot and muggy.”
Of course, if you’re on the verge of retiring, you may be eyeing a new primary residence in a popular area, and now is a good time for that as well. “People who are buying the next roof over their heads are not terribly concerned about where prices are going in the future,” Kelly says. “They need a place to live, and if they can find a place where they don’t have to shovel snow, they’re going to roll the dice.”
With prices down nationwide, it’s a buyer’s market, so don’t hesitate to ask sellers for help, including seller financing. Post-mortgage crisis, many banks want big down payments of as much as 40%, and you may not have ready access to that much cash. “If you have a place that you really want, ask the owner if he’ll carry a contract for five years,” Kelly says. If you have good credit, short-term seller financing can be had with a down payment of as little as 15% or 20%, and you will save origination fees as well.
Regardless of where you get your financing, interest rates on loans have fallen to historic lows, which adds still another reason why it could be smart to buy a vacation home now. You should be able to get a bargain price on a home in a high-demand area, lock in a good interest rate, and start enjoying that getaway you’ve always wanted. And though recent events have undercut the notion of second homes as can’t-miss investments, buying at what seems to be the real estate market’s low ebb could mean future gains as the economy regains its health.

This article was written by a professional financial journalist for Legend Financial Advisors, Inc. and is not intended as legal or investment advice.

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