NAR Finds Second Home Market Down in 2007 By Brad Finkelstein WASHINGTON - The National Association of Realtor reported that second home sales (vacation and investment homes) were 33% of all home sales in 2007, close to their historic norm, although the volume of sales declined. By type, 21% were homes purchased for investment while 12% were vacation homes. In 2006, the percentages were 22% and 14% respectively, according to the NAR Investment and Vacation Home Buyers Survey. In terms of volume, vacation home sales were down by 30.6% to 740,000 from a record 1.07 million in 2006; for the same period, investment property sales fell 18.1%, 1.35 million from 1.65 million. Lawrence Yun, NAR chief economist, said "Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007. Vacation-home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn't find a property as a result of tight supplies in preceding years. "Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty. The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007. Some buyers simply adopted a wait-and-see attitude." The median price of a vacation home was $195,000 in 2007, down 2.5% from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006. Mr. Yun said lifestyle factors and strong demographics remain positive for the vacation home market. "Investment considerations are secondary for vacation-home buyers, so there is some dormant underlying demand. A peak of population is moving through the prime years for buying recreational property. It is welcoming to see investment sales returning to pre-boom sales activity." Investment-home buyers last year had a median age of 42, earned an income of $92,900, and bought a home that was relatively close to their primary residence - a median distance of 27 miles. When asked about the most important reasons for their purchase of an investment home, 51% said to provide rental income; 39% to diversify investments; 21% to use for vacations or as a family retreat; 16% for use by a family member, friend or relative; 11% for tax benefits; 10% to use as a primary residence in the future; and 4% because they had extra money to spend. The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100, and purchased a property that was a median of 287 miles from their primary residence, NAR said.