Vacation Homes: Is Now the Time to Buy?

Vacation Homes: Is Now the Time to Buy?

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Vacation Homes: Is Now the Time to Buy?
By Patricia Kime

Deborah Rehyer of Vienna, Va. had just one requirement for buying a vacation home: It had to be waterfront.

Her search began in a region 90 minutes from her home, in Virginia's Shenandoah Valley. And her search ended on the opposite side of the state with a six-acre parcel on a tidal pond just off the Chesapeake Bay.

"Waking up in the morning is the best. I take my coffee out to the floating dock and watch the world wake up," Rehyer says of her vacation property.

Many of us visit vacation spots and wonder what life would be like to live there. Often, we pick up the real estate brochures searching for a cheap vacation home or the luxury house of our dreams.

Even as the national real estate market remains stagnant, professionals and experts say that the market for vacation homes may be the most attractive it's been in years, with prices down and interest rates low.



"If you're looking at getting a recreational home or a home where you think you want to spend most of your time in -- maybe the next portion of your life -- it's doable now. You can get in the door," says Tom Kelly, syndicated real estate newspaper columnist and co-author of "How a Second Home Can Be Your Best Investment."

The number of vacation-house purchases rose slightly in 2009, up 1 percent from 2008, according to the National Association of Realtors' 2010 Investment and Vacation Home Buyers' Survey. Although the number is still down from the vacation-home-sales heyday of 2005 and 2006, buyers are returning to the vacation-home market, the NAR says.
The typical vacation homebuyer has a median age of 46 and a median household income of $87,200. Half of all vacation home buyers in 2009 purchased their second home in the South; the typical property was a median distance of 348 miles from their primary residence, according to the NAR.

If you are among those considering buying a vacation home, think about the following before starting to expand your real estate portfolio.

Preliminary Analysis/Affordability

If you dream of owning a home away from home, start your search by determining how much home you can afford. If you haven't saved enough for a cash transaction, you'll need a mortgage, and the bank can help you determine what you can pay. Loan officers determine the amount of mortgage and type of mortgage for which you qualify based on several factors, including the amount of cash you have for a down payment, your debt-to-income ratio and your credit score. (Also see our guide: "How Much Home Can I Afford?")

Regarding the down payment, banks have gotten tight on requirements, often asking for between 20 percent and 40 percent for a down payment on a second home. Make sure you have money set aside for the down payment and closing costs.

To calculate your debt-to-income ratio, add your current monthly home payment, the projected payment of your second home and any other debt (car payments, student loans, credit cards, etc.) and compare it with your monthly gross income. Know that lenders will not give loans to those who have a debt-to-income ratio of more than 36 percent, so consider this in addressing your price range.

Also, make sure your credit score is in its best form. (Still wondering how much home you can afford? Check out AOL Real Estate's Mortgage Affordability Calculator.)

Then ask yourself the following question: Do you plan to rent out your vacation property? NAR says only one in four vacation homebuyers plan to rent out their properties to others. But one in five investment homebuyers plan to use their purchases for personal vacation use and/or as a family retreat. (Also see our guide: "Rent Out Your Home as a Vacation Property and Make Money.")

The difference between a vacation home and an investment property, according to the Internal Revenue Service, is 14 days: If you rent a house out up to 14 days a year (which you can do tax-free and still qualify for mortgage deductions on your taxes), it's a vacation home; if you rent it out and spend less than 14 days per year in it for personal use, it's an investment property. Make sure you calculate the tax ramifications when considering what you want out of a property.

Still worried about affordability? Consider shopping to buy a vacation home and asking the owners whether they are interested in owner-financing, Kelly says. "Ask what's possible. If an owner sees a terrific family that's willing to put 10 to 15 percent down and will cash them out in five years, they may be amenable."

The Fun Stuff

Beach, mountains, island getaway, rural retreat? When looking at homes, make sure it has something special – a view, proximity to main attractions, a three- or four-season resort with vacation appeal to all or waterfront. Finding a place that has one quality with universal appeal boosts one's enjoyment of a space and is good for resale. "Chances are if you like something about a place, others will too," Kelly says.

A rule of thumb for buying a vacation home is to find one within a three-hour drive of your primary residence so it's accessible on weekends. Kelly says people tend to stick with this rule, mainly because they enjoy a close corps of friends and family at their primary residence and want to stay close. Still, the NAR reports that 50 percent of vacation homebuyers in 2009 purchased a home 500 or more miles from their primary house, so don't restrict your search if you, say, live in Ohio and really want a home on North Carolina's Outer Banks.

Taxes and Oversight

A quarter of buyers who purchased a vacation home in 2009 intend to use it as a principal residence in the future, the NAR says. Many vacation homebuyers look for potential retirement homes. Owners avoid paying capital gains taxes when they sell their principal residences, so if they move into their second residences for at least two years, they can sell that house without paying capital gains.

Joy and Cliff Williams of Williamsburg, Va. took the opposite tack. They left their primary residence, an 18th-century historic home in the country that Cliff restored in the 1970s, to move into town. But they didn't want to give up their rural retreat, so they decided to rent it out as a vacation destination. Using VRBO.com by HomeAway and other websites, Cliff Williams now manages the house, Lightwood, as a side business and the Williamses have been able to keep a precious asset. "It was a leap of faith as to whether it would work, but it did, " Joy says. "We get people from as far away as Australia and Britain renting out our property."

Kelly says that Internet sites like VRBO.com and craigslist.com have eased the challenges of renting out vacation homes, so he encourages buyers sitting on the fence to keep an open mind regarding renting out their dream homes.

"I think people underestimate the number of people who are interested in renting vacation homes rather than staying in hotels," Kelly says.

They also overestimate the amount of time they'll spend at their own vacation home, he adds. But don't let that scare you. Vacation homes, he says, are a lure for family and friends. As a vacation homeowner himself, he's hosted many family gatherings in the mountains near Seattle. "You can't put a dollar sign on that stuff. Those are family memories we got," Kelly says.


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Gay Housing Project Slated for Palm Springs

By Michael Kaminer

Does architecture for older gay people differ substantively from design for hetero seniors? Certainly in execution, says Hollwich, who runs a program in aging and design at the University of Pennsylvania.

"Fighting age discrimination through architecture is the same for the LGBT community and everyone else - however, designing for the LGBT community differs in programming (all master bedrooms for the LGBT community, different socializing programs, different idea of the extended family)," he wrote. "The one point that I might want to speculate is that the LGBT community is more open for progressive design -- so this is where the power of architecture can truly unfold its potential."

On a more sobering note, the New York Times in 2007 reported that LGBT seniors face homophobia, isolation, and even abuse.

While BOOM's price structure has not been firmed up, Hollwich says the project "will have a full range of [home] sizes -- from studios to 4-bedroom houses. We aim to make it affordable for all kind of income levels. since the concept of BOOM is about integration on every level."

BOOM will break ground in 2012, Architizer says, starting with 300 residences built in eight neighborhoods, each designed by a different firm. Phase 2 of the project will add another 300 residences.

Matthias Hollwich has big plans to build an innovative gay housing development for seniors in Palm Springs, Calif., called BOOM. The 40-year-old New York architect is the ringleader of what FastCompany magazine's design blog is calling -- with some understatement -- "a wacky, $250m old folks' community for gays."

As the gay housing market mushroomed over the last decade, developers jumped on the bandwagon by hyping LGBT-oriented retirement communities. But most -- including Santa Rosa's Fountaingrove Lodge, Oregon's Rainbow Vista, and a facility in Boston's Fenway neighborhood -- tanked before laying a brick.

Will BOOM be a bust? "Most other developments just focused on quick sales," Hollwich says. "We don't. We will also have a 10-city tour where we invite people to come to workshops, work with us on the reinvention of architecture and community. Once we have a critical mass and shaped the concept of BOOM towards the needs of the future residences, then it will be for sale....It will be a big success, for the people who will live there and beyond."

BOOM is a "master-planned community,...pedestrian-oriented, culture-driven, designed to inspire residents to better themselves," according to the See photos of homes for sale in your area and across the country on AOL Real Estateproject's website. Along with Hollwich's firm, HWKN, the 100-plus acre site will feature boundary-breaking buildings by the glossy likes of Diller Scofidio + Renfro, LOT-EK, L2, Surfacedesign, and Arakawa + Gins (see computer renderings below).

Plazas and pathways will link 300 homes to an entertainment complex, with restaurants and stores, a boutique hotel, a gym with spa, and wellness facilities.

What the site doesn't mention is sexual orientation. But Hollwich himself waxes enthusiastic about FastCompany's sobriquet for BOOM as "a theme park for gay retirees."

"Yes!" he wrote in an e-mail. "We aim for a 40+ development that is inspired by the LGBT community, but open for all....At BOOM we gave the architects full freedom to unfold their creativity -- and what we got is a survey of today's most contemporary architectural thinking. We intentionally did not want to create one common language, since BOOM is all about diversity."

Does architecture for older gay people differ substantively from design for hetero seniors? Certainly in execution, says Hollwich, who runs a program in aging and design at the University of Pennsylvania.

"Fighting age discrimination through architecture is the same for the LGBT community and everyone else - however, designing for the LGBT community differs in programming (all master bedrooms for the LGBT community, different socializing programs, different idea of the extended family)," he wrote. "The one point that I might want to speculate is that the LGBT community is more open for progressive design -- so this is where the power of architecture can truly unfold its potential."

On a more sobering note, the New York Times in 2007 reported that LGBT seniors face homophobia, isolation, and even abuse.

While BOOM's price structure has not been firmed up, Hollwich says the project "will have a full range of [home] sizes -- from studios to 4-bedroom houses. We aim to make it affordable for all kind of income levels. since the concept of BOOM is about integration on every level."

BOOM will break ground in 2012, Architizer says, starting with 300 residences built in eight neighborhoods, each designed by a different firm. Phase 2 of the project will add another 300 residences.

Real Estate 2011: No Rebound, No V

By Candy Evans

What's in store for real estate in 2011? The year 2010 was a terrible one for the U.S. housing market. We started the year with high hopes that since 2009 had been so shockingly bad, 2010 could only get better. Next came the euphoria of the first-time home buyer's credit. Then came the slide: We ended the year with sinking home values in almost every U.S. market, except four: Los Angeles, San Diego, San Francisco and Washington, D.C.

Even worse: Six U.S. markets hit their lowest pricing levels since 2006: Miami, Charlotte, Atlanta, Portland Oregon, Seattle and Tampa.

So how do we look for the new year?

Now that our hangovers are in check, here's the bad news: Hardly any expert out there thinks the market is going to get better in 2011. Many think it will get worse. Enter Dr. Gloom, Gary Shilling, not to be confused with Standard and Poor's Case-Shiller report, which is also not very positive. Shilling says home prices could crater in 2011 by as much as 20 percent. Zillow has more optimism and put money on a 5 to 7 percent decrease. But the overwhelming majority opinion is, well, not that great. The Wall Street Journal surveyed 96 analysts:
Some 96 analysts surveyed made their forecasts public. Of those, 30 expect prices to fall next year, and another 30 are calling for annual home price appreciation of no more than 1 percent. The most bearish forecaster, A. Gary Shilling, president of A. Gary Shilling & Co., calls for prices to fall by 11 percent in 2011.

And when you hear that John Paulson practices what he preaches and bought two homes this year, don't get any wild ideas: he made billions betting on the sub-prime market and can afford several hundred homes. You and me, we don't have that luxury.

Sliding home prices will drag on the economy like a lead weight. Think of the consequences: lower property values, lower municipal taxes in fiscally hurting cities, more underwater homeowners who owe more than their homes are worth, more foreclosures, more shadow inventory sitting around further diluting prices.

Let's play optimistic here, and assume that, because of market-glutting home foreclosures, home prices will decline another 5 to 7 percent in 2011. What could make buyers want to buy at 2003 home prices? Steady paychecks. But with an unemployment rate of now over 9 percent, even people with jobs are afraid to rock the boat and move up, or anywhere. That's why many experts are expecting the market to bottom in 2007, and say homeowners should not expect a V-shaped recovery.

Is this trend good for anyone? Maybe the home buyers who can now slip into homes they could not begin to afford just a few years ago. We've got low interest rates, but banks have the strictest credit standards ever. Rick Sharga, a senior vice president at a company that follows national foreclosure trends, RealtyTrac, says the market won't recover until consumer confidence returns, which won't happen until consumers see real job creation.
Then there's Patrick O'Keefe, an economist, who wonders why housing supply and de­mand are not more in balance by now -- new home construction has all but stopped, but existing home prices are sinking.

There is, he says, "an almost unbridgeable gap be­tween potential buyers and sellers."

It's more like a giant clog in the system. Sellers can't sell because so many would have to take money to the closing table, and buyers either cannot afford the home or cannot get a mortgage.

So if you're looking for happy spring real estate news, you may have to wait three more years, when analysts think the market will kick back to normal.

As for new home construction, analysts are pre­dicting more than 700,000 hous­ing starts in 2011, which would be an improvement from 2010, but only half of what is actually needed to keep up with population growth. In New Jersey, for example, 13,500 housing units were started in 2010, which is better than 2009, when only 12,235 were begun. Keep in mind those are the lowest housing start numbers on record since World War II.

About the only silver lining is that this lack of construction could ultimately lead to a housing shortage down the road, which would then pump up housing prices. Gen X and Y, once they move out of their parents' home, may have to rent, or buy, which could lead to a housing shortage.

Maybe it's time to kick 'em out!

October's Home-Price Drop Keeps Housing as a Major Drag

By Joseph Lazzaro

The U.S. housing sector received another dose of sobering news Tuesday, as home prices in 20 major cities fell a worse-than-expected 1.3% in October from September, on a non-seasonally-adjusted basis, according to the S&P/Case-Shiller U.S. National Home Price survey. That's the index's fourth straight monthly decline. Also, the 10-city index fell 1.2% in October compared to September.

Home prices in the 20-city index also fell 0.8% in October on a year-over-year basis. However, the 10-city index rose 0.2% in October on that basis. October's decline marked the first year-over-year drop for the 20-city index since January.

A Bloomberg survey had expected home prices in the 20-city index to fall 0.7% in October from September, and 0.2% on a year-over-year basis, after falling a revised 0.8% in September from August, and 0.6% year-over-year in September.

"There Is No Good News"

David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said concerned about a double-dip recession in home prices is warranted. "The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October's report. Home prices across the country continue to fall." Blitzer said, in a statement.

"The trends we have seen over the past few months have not changed," he said. "The tax incentives are over, and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism."

In October, all 20 metropolitan statistical areas (MSAs) in the 20-city and 10-city indexes were down compared to September, Blitzer added. Further, while not always consecutive months, 12 of the MSAs and both indexes have posted at least six months' of decline since the beginning of 2010.

Monthly price drops in October in major U.S. cities were as follows: New York, 1.6%; Chicago, 2%; Boston, 1.2%; Washington, D.C., 0.2%; Atlanta, 2.9%; Tampa, 0.9%; Miami, 1.1%; Dallas, 1.1%; Denver, 0.6%; Los Angeles, 0.7%; San Francisco, 1.9%; and Seattle, 1.3%.

October's home price report is an unqualified negative. As the impact of the homebuyer tax credit waned, home prices have stagnated. The large inventory of unsold homes is likely to continue to place downward pressure on home prices at least through early 2011, and probably for longer. Until both existing- and new-home sales rise in a sustained way to lower those high inventories, home prices will keep struggling.

Most Expensive House in U.S.? A Shack

Most Expensive House in U.S.? A Shack
By Ann Brenoff

What is the most expensive home on the market in U.S. right now? If you guessed Candy Spelling's Holmby Hills, Calif. mansion, selling for $150 million, you'd be right -- unless you were going by price-per-square-foot.

According to a Forbes blogger, if you compared listings strictly by square footage, a shack on the beach in Carpinteria, Calif. tops the country's list of most expensive homes.

Well, yes and no.

Sure it's great fun to compare it to Candy Spelling's manse of 56,500 square feet (see photo below, right) and realize that the beachfront shack listed at $5.3 million (with less space than a regulation squash court) comes out to a higher per-square-foot price -- Spelling's is $2,700 a square foot and the aforementioned shack is around $7,000 per square foot.

But to throw a bucket of chilled Perrier on the premise, there are always factors that impact a home's value which have nothing to do with the size of the actual shack, I mean, house: the view, location, sun angle, design, style, special features and condition all weigh in.

Starting with location, have you been to Carpinteria lately? Nice place for a weekend camping trip if you don't mind the roar of the traffic just outside your tent. The beach is nice enough, but you aren't going to see limos drive up here for any A-list parties.

Nor will you find a Michelin-star restaurant or a single Kardashian selling anything anywhere near Carpinteria. It's home to surfers, dudes in pickups, and some students who can't afford campus life at UC Santa Barbara, 12 miles away. Dudes in pickups don't frequent Holmby Hills, where Spelling kicks off her Manolos.

We allow how not everyone needs a near brush with celebrity to find fulfillment in their housing. So how about design? The shack is, to put it in kind Realtorspeak, in need of TLC. Some might say it's a tear-down and what you're really paying for is the half-acre of land, the 92 feet of beachfront it sits on, and the fact that its thoughtful owner has already gotten approvals to build a 2,600-square-foot replacement home on the site.

Spelling's place? A regular palace worthy of Queen Oprah, who at one point was rumored to be buying it. It's move-in ready for even the most discriminating buyer. A housekeeping staff must dust and vacuum 24/7 here to meet Candy's expectations in the spit-and-polish department.

Our shack does have a leg up in the view category. There's no ocean view like the one from the sand. Candyland, as real estate pundits have dubbed the Spelling home, is lovely, gated and private. It has gracious lawns that sprawl over its 4.7 acres. But not even Aaron Spelling's money could move the Pacific Ocean closer.

Still, how it is possible that a beach shack in a beach shacky town can command a higher price per square foot than a veritable castle in one of the country's toniest neighborhoods? Well, to state the obvious: Neither of them has sold yet, have they?

The Daily Fix: Remove a Broken Key From a Lock

The Daily Fix: Remove a Broken Key From a Lock

Secure Your Home For Summer Vacation

Secure Your Home For Summer Vacation
by Jen Jafarzadeh L'Italien, Posted Jun 21st 2010 9:30AM

Going on a trip? Take precautions to keep potential intruders away from your property.

When you finally take some time off for vacation, the last thing you want to worry about is what might go wrong at home while you're away. But the reality is that your home could be a sitting target for burglars when it's empty.

The good news? With this simple checklist, you can head for the sunshine knowing your house is safe and secured. The key to deterring intruders from your house? Make sure your home looks lived-in, even if you'll be away a couple weeks. Here's how.

1. Arrange for mail to be held while you're away. Mail quickly piles up in the mailbox (hello, catalogs!), and an overflowing mailbox is a sure sign to everyone that you're not home. You can easily stop mail delivery by notifying the post office online. Then you can pick up your mail when you get back.

2. Put your newspapers on hold. Besides the waste of paper (who's going to read old news when you return from vacation?), a pileup of newspapers on your doorstep is an easy red flag that you're away.

3. Show-off your alarm system. Make sure to have an easy-to-see sign on your door or window to alert everyone of your spiffed-up security system. Consider putting up a sign, even if you haven't invested in a high-tech alarm.

4. Don't button up the whole house. It's natural to want to "close up" the house while you're away, but you want to give the appearance that the house is lived in. Leave drapes and window treatments slightly open, rather than closed shut. Put some of your indoor lights on timers, and have some of them go on at night to give the appearance that someone's at home.

. Show-off your alarm system. Make sure to have an easy-to-see sign on your door or window to alert everyone of your spiffed-up security system. Consider putting up a sign, even if you haven't invested in a high-tech alarm.

4. Don't button up the whole house. It's natural to want to "close up" the house while you're away, but you want to give the appearance that the house is lived in. Leave drapes and window treatments slightly open, rather than closed shut. Put some of your indoor lights on timers, and have some of them go on at night to give the appearance that someone's at home.

5. Invest in motion-sensing floodlights for the yard. Now is a good time to consider investing in motion-sensing floodlights. When you're on vacation, glaring light will deter potential intruders. And when you arrive home, it'll be easier to see what's going on at night.

6. Leave a radio on. To those outside, the buzz of voices will make it seem like there are people at home. Choose a talk station, like NPR, rather than an station that just plays music.

7. Leave a car in the driveway. If you're flying to your destination, simply leave your car in the driveway. If you're taking a summer road trip, ask a neighbor if they could park one of their cars in your driveway while you're away. It's also a good idea to alert a neighbor or friend that you'll be away, so they can keep an eye on your house.

8. Arrange for your lawn to be mowed. You want to stop some services (like mail delivery) while you're away. But others, like getting your lawn mowed, should continue on just like you're at home. Arrange with your landscaper to have your lawn mowed as usual while you're away. If you typically mow your own lawn, consider hiring a local to come mow your lawn once while you're away during extended trips. Long grass is another sure-fire signal to burglars that the house has been vacant.

9. Take a walk-around your house a week or so before you leave. Check for any shrubs, hedges, trees, or landscaping that looks overgrown (also look for tree limbs that provide an easy route to an upstairs window.) Trim any greenery that looks like it would provide a hiding place for intruders.

10. Make sure unnecessary electrical equipment is turned off while you're away. It's a good idea to plug your electronics in surge protectors that are easy to power on or off with the flick of a switch. You'll also be saving energy (and saving on your electric bill!) by powering off the TV, computer, and entertainment center. Many appliances are also known as ghost energy hogs, sucking energy even when they're simply turned off. By plugging these devices in a safety surge protector, you can stop the flow of electricity.

11. Give the cat-sitter or dog-sitter a spare key before you leave. You don't want to hide the key under a rock, doormat, or in the BBQ grill. These are all known hide-a-key tricks; they give burglars a free pass into your house.

Tip: Ensure you come home to a fresh house post-vacation. Clear your refrigerator of any perishable foods (you can offer your milk to your friendly neighbor) and make sure you take out stinky trash before you leave.