Are Baby Boomers Driving a New Demand in Real Estate? Vacation Homes vs. Investment Homes
Les Christie of CNN Money.com reported in her article "Homes: Big Drop in Speculation" that more investors are dumping their investments; pulling their money out of real estate. As home prices became stagnant or declined in value, the speculators are the first to flee the real estate market.
However, this did not affect the sales of vacation homes. During the year, it increased by up to 4.7% equivalent to around 1.07 million units. The sales of most vacation homes are not influenced by financial benefits but more of a lifestyle choice. The driving force behind this lifestyle choice are the baby boomers, who have the disposable income and most are in the stage of contemplating retirement.
This was supported by a report given by the National Association of Realtors "Vacation-Home Sales Rise to Record, Investment Sales Plummet in 2006".
"In listing the reasons for purchasing a vacation home, 79 percent of buyers wanted to use the home for vacation or as a family retreat; 34 percent to diversify investments; 28 percent to use as a primary residence in the future; 25 percent for the tax benefits; 22 percent for use by a family member, friend or relative; 21 percent because they had extra money to spend and 18 percent to rent to others."
According to the report, the most popular vacation-home destinations are rural areas at 29%, followed by resorts at 24%, suburbs at 22% and urban areas or central city at 10%.
It will be interesting to monitor this increase in demand for vacation-homes. Will this result to investors taking interest in vacation homes? Will more developers divert to projects that highlights the lifestyle choice of the baby boomers?
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