NAR Vacation Property Report

The National Association of Realtors (NAR) recently published their annual Investment and Second-Home Buyers Survey results and their findings were mixed. The bad news was that vacation property sales plummeted: 

NAR’s annual Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.6 percent to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1 percent to 1.35 million last year from 1.65 million in 2006.  At the same time, primary residence sales declined 10.0 percent to 4.34 million in 2007 from 4.82 million in 2006.  

The reasons why?:

The overall sales decline in 2007 resulted from a combination of factors.  “Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” Yun said.  “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 good news was:

Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59 percent of primary residence buyers.  Forty-four percent of vacation-home buyers and 57 percent of investment buyers said they were likely to purchase another property within two years. 

The information given only had to do with vacations properties sold within the United States, nothing was given with regards to international properties.

Canadians Continue to Carry Market

Conversations with local realtors and developers confirms that Canadian sales are strong, with some commenting that half of their sales are now with Canadians. The Canadian economy is doing well, at least in comparison to what is happening in the United States, and the dollar is extremely strong, now worth more than the US dollar. It was only a few years ago that the exchange was 67 cents to the US dollar. At that time this curbed sales to Canadians in Vallarta, in a market that has been traditionally strong for Canadians looking for a warm winter second home. But with a strong dollar, and high oil prices (especially for those in Alberta), strong sales should continue. Canadians have been known to usually enter in the lower end of the market, but activity is reported strong across the border, even in the high-end of the market. Graph courtesy of Rob Chipman’s RE Blog. 

Average List Prices in 2007 for new Product

Our study of new product developments in the Vallarta region established 125 resort real estate developments. We obtained the lowest starting price and the highest list price for each project. The results showed that the median average (half below and half above) for the lowest starting point was $380,000 USD. The median average for the highest list price was $1,060,000 USD. The average of these two, again using the median average, was $542,000 USD. This was for both condos and homes. If we focus on just condominiums, the median average was $356,000 USD. So the average list price for a new condominium is $356,000 USD. If we compare this to what the median average list price was for condominiums in the MLS resale market (Multi-List Vallarta), we come up with $272,000 USD. Purchasers are paying a premium (30%) to obtain a new condominium over an existing property in Vallarta.  Why so much? Well, purchasers like new things and the new amenities that come with new developments. As well, most of the new projects have premium locations along the beach or on the hillside overlooking the bay. An older property is built with older building techniques, architectural design and style. The older it is the more maintenance or renovation it may need. This doesn’t mean, that like a car, you lose value when you drive it off the lot. The new unit retains it value for the same reasons that an older unit is valued for less – it has more to offer with regards to newness, style, location, view and minimal maintenance.