Should consumers start looking for the vacation house of their dreams?
Home prices have fallen steadily across America since 2005. In many popular second-home markets, shoppers looking for a second home can find great deals.
"Now is the time to buy," says Randy Johnson, the mortgage expert at Credit.com.
The full-blown financial crisis and sharply falling economy have combined to pop the bubble for second homes, sparking significant price declines in vacation-home markets across the country.
- In Florida, the median sales price for existing homes in January was $139,500, a 33 percent decline from a year earlier, according to the Florida Association of Realtors.
- On Hilton Head Island, S.C., ocean-oriented property has fallen 23 percent, while other areas have seen price declines up to 44 percent, according to Andy Twisdale, a Realtor with Charter One Realty and Marketing in Hilton Head.
- Some entry level houses that went for $400,000 at the market peak on Massachusetts' Cape Cod now are being sold for half that amount, according to Paul Grover, a partner at Robert Paul Properties in Osterville, Mass.
- Significant price drops have occurred in many California vacation-home markets such as Palm Springs, Lake Tahoe, Napa Valley, the Sierra Mountain foothills and Carmel, according to Johnson.
The overwhelming supply of foreclosed homes at discounted prices is driving the market lower. While some second-home buyers may be tempted to wait for prices to fall further, homebuyers who wait for an absolute bottom are likely to miss it, Johnson says.
"You only know if you bought at the bottom five or six years later," he says. "But people will look back 10 years from now and brag about the price they got in 2009. The best time to buy is when a lot of people want to sell."
Today's marketThat time to buy may be now. The 3.6 million existing homes for sale at the end of January represented a 9.6-month supply, according to the National Association of Realtors.
Some of the best deals in today's market can be found in foreclosures and short sales, which are pushing prices lower, says Jack Neuman, a broker at ReMax Advantage Plus in Boca Raton, Fla.
"All the really good deals are short sales, where the lender is willing to take less than what the mortgage is worth," Newman says. "It's no longer a typical real estate market where buyers and sellers agree on a price. Instead, the price is where the bank is willing to take a hit."
Short sales and foreclosures currently make up a small but significant slice of home sales in the Hilton Head region, Twisdale says.
"In the last 90 days of 2008, there were 90 sales in the range of $800,000 to $1.2 million," he says. "About 10 percent were bank sales, foreclosures or short sales. Buyers come in preapproved and ready to jump. When these homes hit the market, if they're priced well, they disappear in a matter of days."
In parts of Florida, values have fallen so low that prices have sunk below replacement costs, Newman says.
"This is a good time to buy because you couldn't replace these houses for the price they are currently selling for," Newman says. "If you were to duplicate a house in this area and build from scratch right now, with increases in the price of labor and materials such as concrete and metal, the new home would cost more than the existing home. So you can get a much better deal with an existing home."