DOUG AZARIAN
Many potential buyers

Sales of vacation and investment properties set records last year and industry observers are expecting the second-home market to continue to flourish in coming years as baby boomers age and seek out additional homes.

Four out of 10 residential transactions in 2005 were second-home sales, according to the National Association of Realtors. More than a quarter of all the homes purchased last year were for investment, while another 12.2 percent were vacation homes. Vacation-home sales actually rose nearly 18 percent last year, while investment-home sales increased nearly 16 percent.

In Massachusetts, where second-home sales are common in regions like Cape Cod and the Berkshires, real estate brokers generally don’t have a strong handle on what percentage of transactions are vacation- or investment-home sales. The Massachusetts Association of Realtors does not collect that information.

On Cape Cod, home sales fell 12 percent in 2005 compared to the prior year, with more properties available for sale and homes taking weeks, if not months, longer to sell.

Doug Azarian, broker-owner of Century 21 Dream Homes in Falmouth, said the reduction in home sales was part of the overall market slowdown across the state.

But Azarian said there are several factors that bode well for the vacation-home market on the Cape, including the large number of baby boomers and affluent households in eastern Massachusetts, along with the lack of buildable land and numerous restrictions on development – which is limiting the availability of housing and driving home prices up.

A little more than a third of the 50 home sales that Azarian’s company handled in the last six to nine months were second-home sales, he said.

“There are still a lot of potential buyers out there and the Cape as a whole is pretty close to being built out,” said Azarian, who is president-elect of the Massachusetts Association of Realtors.

James H. Crocker, president of the Cape Cod & Islands Association of Realtors, agreed that stringent building rules and regulations are restricting the housing supply while demand may be growing.

“The vacation home market is pretty well protected as an investment because the regulations limit home development,” said Crocker, a Barnstable town councilor who owns Wianno Realty in Osterville.

In Barnstable, about 30 percent of the homes are owned by people who have a primary residence elsewhere, according to Crocker.

Real estate brokers on the Cape are reporting that the first quarter of the year appeared to be much slower than last year.

Single-family home sales in the region are down by about 15 percent over a year ago, according to Azarian. At the same time, the number of for-sale homes has surged.

There were about 3,500 single-family homes and 900 condos listed for sale on the Cape as of last week – almost 60 percent higher than the same time last year, said Azarian, citing information from the local multiple listing service.

In Azarian’s office, which serves the upper Cape communities of Falmouth, Mashpee, Bourne and Sandwich, properties that sold within 60 to 75 days only 18 months ago are now taking between 120 and 150 day to trade.

“There’s a little bit of pressure on sellers to maybe price their home a little better and that makes it a great opportunity for buyers right now,” he said.

Crocker said anything “that’s priced to sell is flying off the shelf.”

“It’s all about pricing in this market,” he noted.

‘Solid Purchases’
With instability in the stock market, investment purchasing was up a little in the last year, according to industry observers.

Investing in a Cape property might seem like an attractive option because of strong home-price appreciation in the last few years. The median price for a single-family home in Barnstable County has soared 76 percent in the last five years from $215,900 in 2001 to $379,900 last year, according to The Warren Group, parent company of Banker & Tradesman.

“So many people have viewed [a Cape property] as a viable investment opportunity,” said Crocker.

But Crocker pointed out that the Cape doesn’t have a year-round rental base, making the investment purchases seem less attractive.

Azarian said that there are probably fewer investment purchases occurring now, and the real estate market is showing the same type of activity and patterns that were seen three to five years ago.

Nationwide, there were 1.02 million vacation-home sales last year, and 2.32 million investment-home sales, according to NAR. The median price of a vacation home was $204,100 last year, up 7.4 percent from $190,000 in 2004. The typical investment property cost $183,500, 24 percent higher than the $148,000 price of a year earlier, according to NAR.

More than 75 percent of vacation-home buyers have no interest in renting their property and 21 percent said it would become their primary residence upon retirement.

While not having specific statistics, Azarian estimated that more than 20 percent of the vacation-home buyers on the Cape rent their property for a few cases.

“We’ll see buyers come down to the Cape, buy their first vacation home and for the initial three to five years they’ll ask if we can help them rent it,” he said.

Many homebuyers have no interest in renting at all, and plan to eventually retire on the Cape, said Crocker.

That seems to be the case in the Berkshires. Most buyers of second homes in the area do not want to rent their properties, according to Sheila Thunfors, one of the owners of Stone House Properties in West Stockbridge.

Thunfors, who estimated that at least half of the residential real estate transactions in southern Berkshire County are vacation-home sales, said the area sees very little investment purchasing

“These are really solid purchases. They’re not dependent on future rental income,” she said.

Most investment homebuyers are in the South. According to NAR, 30 percent of investment buyers hail from the South, while buyers in the Midwest and Western regions each purchased 24 percent of investment property. Fifteen percent was purchased from buyers in the Northeast.

Meanwhile, a third of vacation homebuyers are in the Midwest, NAR reported. Buyers in the South accounted for 30 percent of the vacation home sales, and the West 20 percent. Only 17 percent of vacation homebuyers were from the Northeast.

Buyers purchasing second homes in the Berkshires are typically affluent individuals who are nearing retirement and want to spend as much time in the home as possible, Thunfors noted.

A bulk of second-home buyers are those from the New York and New Jersey metropolitan area who can drive to the Berkshires during holidays and the weekends, as well as “seasonal” buyers who spend part of the year in states with warmer climates, explained Thunfors.

Unlike most other regions in the state were residential sales tumbled last year, single-family home sales in Berkshire County were up about 5 percent from 2004. The median price for a single-family home price also jumped 8 percent last year.

“I think [the market] is still going to be quite strong. There’s always a limited supply of inventory and the demand is always there,” said Thunfors.

Not every home in the region in suited for the second-home buyer. Second-home buyer generally look for homes with bright, airy and open floor plans, said Thunfors, and aren’t too interested in homes that would typically be found in any suburban neighborhood.

According to NAR, typical vacation homebuyers last year were 52 years old, earned $82,800 and purchased a property that was a median of 197 miles from their primary residence. Nearly half of the vacation homes were less than 100 miles from the homeowner’s primary residence.

Thunfors said vacation homebuyers in the Berkshires probably earn a lot more than $82,800 and are generally in their 50s.

“Although we are starting to see more young families,” she added. “That seems to be a new trend of people wanting to get their kids to the country.”