This Blog is courtesy of our Blogger at Large, Tara Powers...
Why now may be the best time to take a vacation…
As Billy Joel would say, “Some folks like to get away / take a holiday from the neighborhood.” Recent economic events have certainly contributed to our ability to do just that. The vacation home has long been a coveted item in American culture, and with home prices plummeting everywhere, people who have the means to buy are snapping up available properties in vacation locales that may once have been out of their price range.
And the real estate and financial crisis has had an effect on European buyers’ ability to purchase vacation homes as well. The Association of Foreign Investors in Real Estate (AFIRE) conducted a Foreign Investment Survey in 2007, in which 56 percent of foreign buyers surveyed identified the United States as the most stable and secure place to buy.
Over the course of one year, from May 2007 to May 2008, an estimated 150,000 to 190,000 homes in all 50 states and Washington, D.C. were sold to foreign buyers. According to this research done in August by the National Association of Realtors, 25.4 percent of these purchases were Florida properties (California and Texas being the second and third most popular states).
Although home values in Florida are still falling, sales made state-wide increased every month this year, as of July 2008. 33.3 percent of these foreign buyers are British, attracted by generally affordable Florida housing as well as the favorable exchange rate.
The fact that the euro-dollar exchange rate has been so favorable towards the European Union has contributed to the surge of home purchases. Foreign buyers made 40 percent of those purchases in cash, up 12 percent from the study done the previous year.
The homes purchased tend to be more expensive than those purchased by domestic buyers (about 36 percent more expensive, to be exact) — 14 percent cost upwards of $750,000. Mostly condos and townhouses, the properties are intended for use as vacation homes, inhabited for just less than three months out of the year.
Russian investors looking to escape their own highly unstable markets are moving outwards to real estate markets overseas as well. Twenty percent of Russian investors are seeking vacation homes in resorts, and most of these buyers tend to be wealthier, with interest in luxury properties in areas like Cote d’Azur, Tuscany, and New York. Those in the middle class stay closer to home, making purchases in the Middle East, as well as Central and Eastern Europe.
At the same time, Cape Verde, a small island off the coast of Senegal, has seen its vacation home market take a turn for the worse as a result of the financial crisis. A favorite spot for British, Irish, and Italian buyers over the past few years, the country’s GDP growth has slowed markedly over the past year, mostly due to its alarmingly high dependence on foreign investment.
Similarly, the numbers of Realtors who have worked with foreign buyers has gone down from 32 to 26 percent since the 2006-2007 report, possibly because of waning confidence in U.S. housing markets.
Like everything else currently related to the economy, the vacation home market is subject to the ebb and flow of its buyers’ confidence. The fact that foreign investment in U.S. markets is still so prevalent, though, would seem to be a favorable source of stimulation for real estate, and could help this area of the market rebound more easily than others.
Image Credit: Wikipedia