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Staking a second claim

A National Association of Realtors survey finds sales of single-family second homes are rising, even though mortgage rates also are rising.

Mortgage rates keep rising, but that hasn't kept home buyers down. They're rushing to stake their claims at seashores, lake resorts, mountain villas and other desirable locations.

A recent survey by the National Association of Realtors found that sales of single-family second homes increased 9.3 percent between 1997 and 1999. Last year, 377,000 second homes were sold, compared with 345,000 in 1997 and 296,000 in 1995.

The Realtors do the second-home survey every two years. Aside from a booming economy, the surge in second-home purchases has been fueled by a recent change in tax laws, they say.

In 1997, a law took effect that allows most people who own houses to sell them without paying capital gains tax. The law allows a couple to exclude up to a half-million dollars in capital gains as long as they have lived in the house two of the past five years.

With that change, money that might once have gone for taxes can be used to buy a second home.

The association estimates there are 3.1-million recreational properties in the United States, some of them rented out part of the year.

While multimillion-dollar houses dot oceanfronts on both coasts and high-end residences can be found at most ski resorts, that isn't what most people buy.

The survey found that the typical price paid for a second home _ new or used _ was $127,800 last year, up about 11 percent over four years from the median price of $115,000 in 1995.

"Beach houses, cottages, cabins and chalets are much more common than elaborate estates," the association said. "Prices vary widely depending on type and location, with some mountain cabins selling for under $50,000 while beach houses can easily cost several hundred thousand dollars."

The AARP survey found that the typical buyer was 43, married and had a household income of close to $70,000. Because baby boomers now are mostly in their 40s and 50s _ prime ages for buying vacation property _ the Realtors expect the number of second homes sold to soar in the next decade.

In western North Carolina, where many Floridians buy vacation homes for retirement, sales continue to be brisk, said Donna Allen, associate broker for Gloria Durfey Real Estate in Franklin, N.C.

Allen said the average house sale there is about $120,000. And the average buyer is upper-middle income, perhaps in their 50s with retirement in mind. Some already are retired and own a condominium in Florida and then decide to buy a house in North Carolina where they can meet family from northern states for reunions.

"People who are thinking about retiring up here are buying because they know that property values are just going up and up and up and they like the pace here," Allen said.

A fortuitous change has occurred in financing of second homes, too. The Realtors said that many national lenders now provide mortgages for recreational property that isn't occupied year-round, and that often you can find an interest rate no higher than what you pay on your primary residence. Traditionally, you could find financing for a second home only from lenders in the vacation area, and rates generally were higher.

While some buyers seek sleek and popular places, others look for "quiet, less well-known and more affordable properties fairly close to home," the Realtors said. "Most vacation homeowners prefer to be within a relatively short drive (less than a day.)"

If you plan to rent your property, don't count on the money to pay the mortgage. While oceanfront properties and top-tier villas may provide oodles of rent money in flush times, rentals are likely to fall off when the economy sours. Consider the rental money gravy.

And while property values may increase on your second home, don't count on it. The primary reason to buy is to enjoy.