Vacation home market heats up this summer
Beach town rentals, second-home sales pick up in an improved economy.
After a disappointing summer in 2012, Robert Truskowski hoped his four-bedroom, Laguna Beach home would be a sought-after vacation spot this season. The house, on a private beach, rents for $35,000 a month.
“Last summer was very slow,” said Truskowski, a landscape architect who travels the world working for heads of state and celebrities.
Vacation homes by the numbers
Buyers picked up more than half a million vacation homes nationwide last year. Here are some highlights from the National Association of Realtors’ 2013 Investment and Vacation Home Buyers Survey, covering 2012:
553,000: Number of vacation homes sold, up 10 percent from 2011
11: percentage of all home sales that were vacation homes, unchanged from 2011
$92,100: Median household income of vacation home buyers
46: Percentage of vacation home buyers who paid cash for their property
10: Median years vacation home buyers plan to own the home
Now, less than a week after listing the beach house, Truskowski said, it’s been rented for the entire summer.
What a difference a year makes. The market for rental homes is hot this summer, with vacationers snapping up beach properties, harborside homes and downtown cottages in coastal towns. At the same time, investors have shown renewed interest in buying vacation homes here, too.
With the economy improving, more people appear to be buying second homes with an eye toward renting them out, whether to defer the cost of a mortgage or help pay for their own vacations, real estate agents say. At HomeAway, a national vacation rentals website, listings in Orange County are up 25 percent over last year, according to Adam Annen, HomeAway spokesman. “Demand is outpacing supply,” he said.
David Macleod invested in an oceanfront home on the Balboa Peninsula in Newport Beach with a partner last year. They bought the property at a foreclosure auction for $2.7 million, then spent about $150,000 fixing it up, Macleod said.
“The vacation rental market is so strong,” he said.
So far, the home has been booked for five weeks this summer for $8,000 a week. Macleod, a real estate agent himself, also co-owns a condo in Palm Desert, so he’s dabbling in the winter rental market, too.
Macleod noted that during the recession, property owners dumped their vacation homes first. But that sector is gathering steam now. “The market’s really picked up in the last three to four months,” he said.
Inland communities, however, attract less interest among vacationers, he added. “People aren’t looking,” he said. “They all want to be along the coast.”
Getting ready for the season
Paul Aubin, owner of Newport Beach Vacation Properties, said business has picked up significantly compared to 2012.
“For some people, it’s helping to pay their mortgage,” he said of those who list their homes as rentals. “For some people, it’s helping to pay for their vacation. For others, it’s helping to give them an ROI on their investment.”
The homes often need at least a mini-makeover to make them more inviting to vacationers, a service provided by property management companies such as Aubin’s, as well as Laguna Coast Luxury Rental, the firm that handled the rental of the home on the private beach in Laguna.
At Newport Beach Vacation Properties, Kathi Hill advises homeowners to put their antiques in storage so they don’t attract any crayon-wielding seven year olds. It’s also a tactful way to avoid having to say that the home looks old and needs a more neutral décor.
“We’re scrambling to get things ready. Mid-June is just bananas,” Hill said.
“We’ve got people who give me the keys to their house for the summer and they’ll go traveling around the world,” Aubin said. “They’ll call me and say ‘Paul, can I come home? Is my place available?’ ”
He’s had to tell a client vacationing in Hawaii that no, he could not come home, because his place had been booked for three more weeks. The homeowner took it in stride, Aubin said, and boarded a cruise ship to Fiji.
Cash buyers and multiple offers
Last year, vacation home sales nationwide rose to 553,000 from 502,000 in 2011, the National Association of Realtors said in a report released this spring. “We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes,” said Lawrence Yun, chief economist for the Realtors’ association. The group will release 2013 data next year.
In Orange County, overall home sales were up 11 percent in May, the highest in seven years, while the median home price increased to $540,000, according to DataQuick numbers released last week. No breakouts were available for vacation home sales in the county, but real estate agents along the coast say the summer is off to a strong start.
“We’ve seen an upswing on all properties, particularly in vacation homes,” said Paul Fuchs, a real estate agent at Surterre Properties in Newport Beach. “If the home is move-in ready and priced correctly, it’s boom!”
Cathy Porter of Laguna Coast Real Estate and Laguna Coast Luxury Rental sold a condo on Monarch Beach Resort Drive for $2.8 million in May. That was $1 million more than a similar property sold for last summer, she said.
The four-bedroom villa with two master suites and an ocean-view deck sold last month came with full access to the amenities of the nearby St. Regis Hotel, including maid service and a concierge. “Order room service!” the listing suggested.
The buyer, who presented an all-cash offer, bought the property with a tenant in place, Porter said, “sight unseen.”
Tenants often look to try out the coastal lifestyle before buying, she said. But lately, the Realtor added, she’s seen more “serious. all-cash, ready-to-go buyers looking for turnkey investment homes already generating substantial income.”
High-end Orange County vacation homes also have attracted bidding wars. Real estate agent Pamela Horton of Surterre cited a bank-owned home in Laguna Beach that was listed at $1.1 million and had 12 offers. It sold as a second home for $1.35 million.
“We are seeing a lot of sales in the $2 million to $3 million range and many out-of-area buyers,” Horton said, whose listings include a six-bedroom Cape Cod-style vacation home on the ocean in Sunset Beach – for $7.9 million.
Rob Magnotta of First Team Real Estate said many vacation home buyers plan to use the properties just for themselves, at first.
“But what often happens is that they realize they’re using it less than they planned,” he said, “and that’s when I get the call to rent it out.”
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