Demand for housing has skyrocketed during the pandemic as low mortgage rates have made it a more attractive time to buy. But it’s not just the main homes that buyers have been looking to grab. Sales of vacation homes have also skyrocketed during the pandemic.
In 2020, vacation home sales grew 16.4%, according to the National Association of Realtors, surpassing the 5.6% growth in total sales of existing homes. Meanwhile, vacation home sales between January and April 2021 increased 57.2% compared to the same period in 2020.
What is driving this trend? The fact that so many people are given the green light to work remotely long term has made vacation homes more attractive. After all, why stay in the same house when you can go back and forth between two properties and enjoy a total change of scenery?
Vacation homes have also served as a pleasant escape during the pandemic, especially for city dwellers who have perhaps, at many times over the past year, tired of being locked in smaller apartments.
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Should you buy a vacation home?
If you have cash that can be used as a down payment on a vacation home and are sure you can qualify for a mortgage, you may be considering buying a second property in the near term. But before you do so, ask yourself these questions.
1. Will owning a second home take a toll on my budget?
You may technically be able to afford a second mortgage. But will it cause you undue financial stress or put you at risk of falling behind on your other bills? Make sure a vacation home fits comfortably within your budget.
2. Is it worth paying a higher price for a vacation home?
Right now, home values are inflated nationally, so if you buy a vacation home, you could be paying a lot more in the short term than in a normal real estate market. Plus, one of the main reasons home prices are so high is that inventory is so low. But in some vacation spots, inventory is even harder to find, so make sure you don’t find yourself paying too much for a property that you then have to track.
3. What is my goal in having a vacation home?
Maybe you want to buy a vacation home so you have an easy place to escape when needed. Or maybe you are considering buying one as an investment. If you are motivated by the latter, be sure to buy in an area that is tenant friendly. Some vacation hot spots have strict rules for renting homes for short stays, so talk to a local real estate agent who can help you determine the likelihood of you enjoying a steady stream of rental income.
As tempting as it may be to buy a vacation home, this is the kind of decision you will need to consider carefully before taking the plunge. And if you do decide to go ahead with a vacation home, don’t be shocked if it costs a lot more than expected.
Buying a second home can be a smart move, but you might also want to wait until property values drop a bit. Staying tight until next year could make a huge difference, especially if you buy that home as an investment more than anything else.