Although the reasons have changed, the luxury and second-home markets on Cape Cod are thriving. This three-bedroom contemporary Cape on Cape Cod’s scenic Waquoit Bay in is currently listed for sale at $2.5 million.

Low interest rates, high baby-boomer demand and a shaky stock market are all fueling a national increase in the number of people investing in second homes.

In fact, the pool of potential buyers in the vacation-home sector appears to be much larger than previously believed, according to a recent National Association of Realtors survey. And in Cape Cod, the largest second-home market in Massachusetts, local activity appears to be mirroring that national trend.

“I thought we were in a recession. If this is a recession, keep it coming,” said Chandler Crowell, broker/owner of Cape Cod Realty in Wellfleet, which deals mainly with the second-home market. “As far as real estate has been concerned, there is no recession.”

The second-home market on the Cape started picking up around 1995 or 1996, and it’s been strong and steady ever since, Crowell said. That timeframe falls in line with the growing trend of middle-class, middle-aged baby boomers beginning to seek out second homes, as noted in the recent NAR survey. NAR predicts that more than 1 million second homes and vacation condos will be built in the next 10 years in response to boomer needs.

Overall, the typical second-home owner is 61 years old, has owned the property for 9 years, earns a household income of $76,900, is married and purchased the property for recreational use. However, the snapshot of buyers is quite different. The median age of those currently buying second homes is 46, according to an earlier NAR survey.

While the majority of second-home owners purchased their property for recreation, the investment aspect of such a purchase has increased tremendously, as the median price of a second home rose nearly 27 percent between 1999 and 2001. And in Southeastern Massachusetts, developable land is especially scarce, rendering existing property even more precious.

Jamie Regan, owner/broker of Century 21 Regan Realtors in Mashpee, noted that new subdivision construction on the Cape has been minimal in the last decade, feeding the ever-increasing price of real estate there.

“Here on Cape Cod, the [Cape Cod Land Bank] has been in place for a few years. Through that, the towns have bought up a lot of vacant land, so the opportunity to do developments is very limited. It’s caused the price of property to skyrocket,” Regan said. “I think the Cape is very close to [total] build-out.”

The size of second homes has also changed dramatically. Years ago, second homes were generally under 2,000 square feet. Today, some are pushing twice that, Regan said. Tear-downs are also becoming more prevalent.

“People either can’t find a location, or the location they do have has just become so special that it warrants tearing the house down and building new,” said Regan.

Investment Option

Tear-downs are especially likely on the water. There are actually quite a few fresh-water properties on the Cape, Regan said. They become the affordable properties, some of which can be had for under $400,000. Saltwater properties start at $800,000, and those are the ones that need work.

“People are bulldozing cottages and building new trophy houses in their place. That’s happening all over the place, because there’s no land left,” concurred Crowell.

In certain sectors of the Cape, the value of homes has gone up so much as to be almost price-prohibitive for the typical or average year-round person, according to Christopher Coy, broker/owner of Hyannis-based Realty Executives Cape Cod and president of the Cape Cod and Islands Association of Realtors.

One woman from Houston who had been renting a place in Chatham for $22,000 a month, a place that needed work but was in a great location, decided to take advantage of record-low interest rates and buy a house for $650,000 with 20 percent down, allowing her a year-round place for the same cash outlay, Coy said.

“Interest rates are still a major driving factor. If they went up, it could have an adverse affect on values,” Coy said. Otherwise, he sees the market continuing strong.

The stock market has also played a role in motivating more people to invest in second homes, Regan said.

“People see buying as a good investment, plus it’s enjoyable, something they can use,” Regan said. People hurt by the stock market might not be buying as expensive homes as they might have before, but they are still buying.

“I talk with people who say they will never put another penny in the stock market again. People see real estate as a really solid, stable alternative,” said Crowell. “It’s the preference to the stock market. You can vacation in it, live in it, see it, control it. It’s a much more tangible investment, something we can all understand.”

Since 2000, 16 percent of NAR survey respondents used equity in stocks or bonds to purchase a second home, vs. 7 percent of buyers prior to 2000. Clearly, recent buyers have become more motivated by a desire to diversify portfolio assets, the NAR survey concluded.

Bob Brady, chief retail lending officer of Cape Cod Bank and Trust, noted that for the past few months his bank has been dealing mostly with people looking to refinance. Those who are buying second homes through his institution are looking to retire in a few years and have purchased second homes by taking the equity out of another home, he said.

However, the increased quality of life that the purchase of a second home can bring has become even more significant not only to aging baby boomers but to those touched by the events of Sept. 11, 2001. While Coy isn’t sure Sept. 11 had an immediate effect on increased second-home purchases, he knows of one interior decorator who was called by several people after the event who told her they were leaving New York or considering retirement earlier than they had thought.

“It definitely opened peoples’ eyes to the idea of quality of life and how ginger everything is,” said Coy.

The Cape & Islands board has noted a large influx of people from Houston and Connecticut, as well as Virginia and other places along the Eastern Seaboard.

“We have people coming from further distances than in the past. They’re coming in with substantial amounts of money for homes,” said Coy.

In a day’s drive, 60 million people can get to the Cape, Regan pointed out.

“After 9/11, people are coming from further and further away. We’re seeing more people from New York, New Jersey, Washington D.C. – both buyers and tenants,” Regan said.

In places like Harwich, where “every street leads to a beach” and the downtown area is in walking distance, quality-of-life assets have been keeping the second-home market alive, according to Beverly Adamkovic, realtor and broker at Coldwell Banker Murray Real Estate in Harwichport.

“We have a downtown area, with banks and condos. In this area, that means a lot. This particular area has been holding up because of that,” she said. “The closeness of everything almost puts the package together for [buyers].”

Currently, the market is experiencing its usual seasonal low because of the holidays. However, like clockwork, come Jan. 15 or Feb. 1, Coy warned that what he calls “Cape Fever” will kick in and people will already be looking forward to a summer – or longer – on the Cape.

“I don’t think the Cape has lost any of its sizzle,” Coy said. “It’s still a highly desired destination resort area.”