The National Association of Realtors recently released a report on second home sales that was reported on by The Dallas Morning News.
The article states that second home sales nationwide dropped by more than 30% in 2007 when compared to 2006. This is pretty consistent with what we saw in the Big Bear real estate market in 2007. There were 1172 residential sales in 2006 as compared to 796 sales in 2007, a difference of 34%.
I noticed a few important points to take from the article as it relates to the Big Bear real estate market:
Second homes are discretionary purchases, and there is a natural tendency to pull back from big-ticket items in periods of uncertainty.
This seems relatively straight forward though we are still seeing some big ticket sales.
There were 45 sales in Big Bear over $1,000,000 in 2006 and 39 sales in 2007. That is only a drop of 13%. There have been 6 sales so far in 2008 over $1,000,000 and 4 properties in escrow right now.
There were 186 houses sold in 2006 priced between $500,000 and $1,000,000 while there was 135 sales in the same price range for 2007. This a drop of 27%.
Houses sold under $500,000 in 2006 totaled 945, with 2007 numbers for this price range coming in at 623 homes sold. This is where the biggest drop was noticed, almost a 34% drop in sales.
We definitely noticed this mentality in Big Bear’s prospective buyers over the past year. Buyers would come up and look at properties, find the perfect place, and then say,”we are going wait and see what happens with things.” In a time of uncertainty, most people want to wait and see what is going to happen with the prices of homes, which is completely understandable.
But, it is during these times that good opportunities will present themselves so you have to be aware of this fact. By the time you realize we have hit the bottom of this market, it will be too late. The top of the market was late 2005 and no one knew until until mid 2006 and later. Once you find we’ve hit bottom, everyone knows. This changes all the dynamics of a buyer’s market. Prices and buyer competition will again rise. Does this sound familiar?
Even with the slowdowns, a significant number of residential properties purchased in 2007 – almost one third of total sales – were acquired as second homes.
This is a significant number when you look at it. For every 3 home sales in the U.S last year, 1 was a second home. This should only increase as more and more Boomers start thinking about retirement. Also, as the world population continues to grow everyday, many people are going to want the cabin in the woods to get away from it (and them) all.
Big Bear is uniquely situated to capitalize on both of these aspects. With over 20+ million people in the Southern CA area, Big Bear and Lake Arrowhead are really the only two options within a few hours drive. And given that we are surrounded by the National Forest, there are only so many options that will be available.
The median price of vacation homes purchased nationwide in 2007 was $195,000, down 2.5 percent from 2006.
The median price for homes purchased in Big Bear in 2007 was $309,950, down 3% from the median price of $319,400 in 2006.
Vacation home buyers appear to be more bullish about the housing market. About 80 percent second-home buyers surveyed last year said they considered it a good time to invest in real estate. That compares with about 60 percent of primary home buyers who had that view of the market.
Interesting point given that most of them have been waiting to see what happens with this market. The current rumblings out there that were are hitting bottom now is bringing some of the fence sitters out to buy. It is still too earlier to tell but I expect things to start getting better in the next 12-24 months.
A peak of population is moving through the prime years for buying recreational property.
The Baby Boomer generation should continue to drive second home and vacation homes sales for years to come. Boomers are the biggest generation from a population standpoint. This, coupled with the fact that many Boomers are now getting the money from their parents passing away, a good amount of this money will be spent on discretionary items like second homes.
Though it may be slow now, pent up demand will catch up and sales are certain to follow.
Knowledge and information are key components of making any smart decision. While all real estate values, customs, and trends are determined by local standards and economic forces, there are still some similarities shared by all second home markets.
These are all good points to keep in mind if you are planning on investing in, or selling, a home in the Big Bear area in the near future.