Purchasing Power

When to buy—or not buy—your vacation home.

text by: Kim Fredericks

April 1, 2005

Last January, when real estate agent Matt Hanson walked up to the front door of one of the homes he had listed, he had to turn around. “There was four feet of snow on the front steps,” Hanson says. In the mountain playground of Lake Tahoe, where he works, the window of opportunity for buying and selling a vacation home opens only as the weather allows. One snowfall last winter left six feet of snow in 48 hours. Two days later came another two feet of fluffy powder. “Come early December, our market slows considerably,” Hanson says. “Once a house gets snowed in, it’s just too difficult to show it.”

Lake Tahoe attracts millions of skiers in winter, but skiing is not the only reason people choose to purchase a vacation home there. “In Tahoe, there are two sets of buyers: those who want to be on the lake and those who simply want to be in the mountains,” Hanson explains. The most desirable area, the Lake Tahoe Basin, has long attracted northern Californians. Those who are serious about purchasing a second home usually come prepared. “They need to have a minimum of $3 million if they want to be on the lake, and they need to know how to time their purchase to get the best selection and best price,” he adds. The market here is not unlike its local black bear population—it hibernates all winter and wakes up in the spring hungry and ready to grow. “If winter remains strong and it keeps snowing through March, it takes that long for the market to recover,” says Hanson. “But the last three winters have been mild, and that has brought buyers in as early as late February.”
 
While warmer days promote optimism, Hanson cautions buyers not to be too eager. “Sometimes the inventory lags behind and then the homes that do come on the market early start selling at appreciated prices,” he says. “It’s better for buyers to wait until May, when the inventory catches up to the demand and the prices start leveling off.” Wait too long, however, and you will be buying leftovers. “These are the homes that nobody wanted—they are in a bad location, were overpriced to begin with or they just have something wrong with them,” Hanson says.
 
While Lake Tahoe’s real estate season has definite boundaries and rhythm, other mountain locales move to a different beat. Carol Dopkin, a 26-year veteran realtor in Aspen, Colo., once enjoyed the down time that accompanied the market there, but now she is faced with a market that has no bounds. “We used to have a slow season, but we don’t anymore,” she says. “Second home owners are staying longer.  They come for skiing and for the summer music festivals.  They come during the off-season, which can be a particularly good time to buy.” (Click image to enlarge) 

She attributes the steady activity to the fact that Aspen, once a ski town, has become a year-round vacation destination. Some buyers, such as the recent influx of Floridians, come just for the summers. “They want to get away from the heat,” says Dopkin. Even developers are responding to the new summer crowd. “We never had air-conditioning in Aspen, but now all the new construction is air-conditioned because so many buyers from the South demand it,” she says.

Aspen has become famous for its idyllic recreational and cultural lifestyle, but it has proven to be a wise investment. “A lot of people want to get into this market because it is solid,” says Dopkin. “They want to put their money in a safe place and establish a retreat for their families. They choose Aspen because it has a history of being a good financial investment.”While most of her customers do their homework before they start looking, an increasing number purchase homes on a whim. “They come on vacation and they are having a fantastic time, and then the day before they are leaving on a 7 a.m. flight, they stop by to inquire about real estate,” says Dopkin. “They just don’t want to go home.”
 
In the same way that Aspen aficionados fall in love with the rugged Rocky Mountains, those who head to Arizona fall for the arid desert landscape and its numerous lush greens on which to play golf.  “So many of my buyers come to visit, discover they love the weather and the golf, and decide to buy,” says Walt Danley, who has been representing real estate in the Scottsdale area for 28 years. His buying season revs up in January, when the popular Barrett-Jackson classic car auction comes to town. “They come to buy a car and end up buying a house,” Danley says. “It’s very spur of the moment.” Like Dopkin, Danley says that his buying season, although busiest from January to May, is not as seasonal as it used to be. “We used to shut down during the summer, yet last year my best month was August.”

Those brave enough to bare the scorching desert heat during late summer are likely to be rewarded with a bargain, but Danley says the market, especially in such desirable areas as Paradise Valley, has been holding steady. “We have a good inventory and a nice selection of homes, so it’s not likely that you’ll see multiple offers,” he says. What you will see is a lot of new construction. “I sometimes worry that the spec builders I know will be hurt because there won’t be enough buyers, but the market has remained strong,” Danley adds. (Click image to enlarge)

The steady vacation home market is being fueled by the baby boomers, some 76 million strong. Thanks mainly to them, vacation homes are currently the fastest-growing segment of the real estate market, and it is predicted to keep growing until 2014. The buying spurt has created enough momentum to nudge even those who are not ready to buy that second home to writing a check. “They are buying prematurely,” Danley explains. “They tell me that they don’t need to buy for six or seven years, but since they have the money, they want to buy now before the market gets away from them.”

In such red-hot beach locations as Naples, Fla., Aubrey Ferrao, president of the Gulf Bay Group of Companies, the developer of Naples’ Fiddler’s Creek, says 75 percent of the community’s sales happen between November and April. “Those who come back during the off-season are the ones who couldn’t make a decision the first time,” says Ferrao, who notes that Naples has seen its home prices appreciate steadily around 21 percent, and the lack of developable land has fueled the market’s prices. “They are buying more quickly than they did five years ago because they don’t have a lot of choices left—there is not much land left in Naples proper,” he says. “They know if they don’t buy now, it is going to cost them more next year, so they are buying years before they are set to retire.”

While this anxious group of buyers has no problem buying now and playing later, they do have some demands when it comes to finding the right vacation home. In Tahoe, they desire the view; in Aspen, they want to be close to the ski action and town; and in Scottsdale and Paradise Valley, gated communities are the location of choice. In Naples, it is all about the beach, and at resort communities such as Fiddler’s Creek, it is about the amenities. “Life is complicated enough without having to worry about your house,” Ferrao says. Fiddler’s Creek gives prospective buyers a taste of what’s to come by turning the task of buying a vacation home into a vacation itself. Through its “Fly and Buy” program, prospective buyers check into the property’s Marco Beach Ocean Resort, where they can relax at the beach or pool between site visits. “If they buy, we pick up the tab for their stay,” says Ferrao.