Foreign Buyers Fuel Second-home Sales, While U.S. Buyers Hold Back

From Inman News, by Glenn Roberts Jr., Monday, March 31, 2008.

"...Foreign buyers are taking advantage of lopsided currency values against the U.S. dollar in some market areas and are propping up second-home sales while many U.S. buyers are taking a wait-and-see approach. Markets with luxury properties can be more immune to the slowdown in second-home sales, real estate professionals also report....

Second-home purchases represented an estimated 40 percent share of total home sales in 2005, compared with 36 percent in 2004 and 2006, and 33 percent in 2007....

Some of the foreign buyers are particularly eyeing foreclosure properties, and coupled with the power of their currencies against the U.S. dollar, "they are picking them up for pennies on the dollar," she said. Finding properties for half the price that they were originally listed at is not uncommon these days, she said.

While U.S. buyers of second homes may view the properties as an eventual retirement home, foreign buyers more typically are looking to rent out the properties for a profit. Foreign buyers are more likely to engage in cash transactions than U.S. buyers, she said.

Fifty-nine percent of vacation homes purchased in 2007 were detached single-family homes, 29 percent condos, 7 percent townhouses or row houses, and 5 percent were other types of homes. In 2006, single-family homes accounted for 67 percent of vacation-home sales, while condos were 21 percent, NAR reported in the survey results.

Sixty-one percent of investment homes purchased in 2007 were detached single-family homes; 20 percent were condos; 11 percent were townhouses or row houses; and 8 percent were other. Twenty-eight percent of vacation-home buyers paid cash for their property, and 35 percent of investment buyers paid cash for their properties....

When asked about the most important reasons for their purchase of an investment home, 51 percent said to provide rental income; 39 percent to diversify investments; 21 percent to use for vacations or as a family retreat; 16 percent for use by a family member, friend or relative; 11 percent for tax benefits; 10 percent to use as a primary residence in the future; and 4 percent because they had extra money to spend, according to the report....

80 percent of second-home buyers consider it a good time to invest in real estate, compared with 59 percent of buyers of primary residences, and 44 percent of vacation-home buyers and 57 percent of investment buyers said they were likely to purchase another property within two years."