After several years of negative trends in the real estate industry, finally a sign of life: A market study just out by a Stuart real estate marketing firm shows budding consumer confidence in the second- or vacation-home market.
"It's no exaggeration to say that four years ago -- unless you count commercial buyers grabbing up ultra-cheap foreclosures -- the second-home market was dead as a doornail," said Rolly Marsh, a market analyst with Chicago-based National Association of Realtors.
The good news comes via the third annual Cotton Report, which reports a polling of more than 800 participants on housing preferences, motivating factors, pricing levels and timelines for purchase. It included participants from 39 states, Canada, Europe and Latin America.
While no direct correlation was made to the harsh winter temperatures, the research survey did point to a significant increase in the number of homebuyers looking to buy a vacation home -- in fact, a year-over-year increase of 800 percent.
This trend is further supported by an increase in the number of buyers describing their transition as "a geographic relocation." Over the three years the study has been conducted, there has been a continuous trend toward smaller homes. The most popular size? It's now between 1,700 and 2,299 square feet. Homes ranging from 1,000 to 1,699 square feet saw an increase of 5 percent in interest levels from 2010 to 2011.
The Cotton Report also shows signs that pricing levels have adjusted to meet consumer expectations.
In 2009, respondents indicated the need for a 50 percent price reduction in order to re-enter the market. In the 2011 survey, this level of price reduction has changed dramatically, down to 20 percent.
"The second-home market is improving, more orderly and more predictable," says the NAR's Marsh. "The bad economy and real estate decline of 2006 to 2008 in particular weeded out the speculators. Now we have second-home buyers who buy homes to live in them. Most aren't purchasing for a quick turnover.
"Buyers are returning cautiously, buying smaller and smarter," said Marsh.
The Cotton Report, an annual consumer report, is compiled by Cotton & Co., a 28-year old firm specializing in the marketing and sales of residential real estate throughout the United States and the Caribbean.
Says Stephann Cotton, the firms president, The adjustment of pricing to realistic levels has brought buyers and sellers closer together. These price adjustments combined with the brutal winter up North have resulted in strong sales in many of our resort residential properties.
The future of the 30-year mortgage is still up in the air, Cotton acknowledges, but the survey indicates that even though 36 percent of the respondents plan to finance their purchase with a 30-year mortgage, an equal 36 percent plan to pay with cash. The rest are opting for a 15-year loan.
One of the most dramatic changes in buyer psychology was seen in the responses from those who are uninterested in a real estate purchase, says Laurie Andrews, Cotton & Co.s COO. In 2010, 96 percent of these respondents cited economic conditions or political instability as the reason for not purchasing. In 2011, the number was cut in half, with 46 percent of the respondents saying they now have no desire to move.
These results show buyers are beginning to separate the home buying process from the economic instability, Andrews said.
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article originally posted on Realtor.org