In Jackson Hole, Wyoming—an established premium resort destination—the brokerage community is reporting significantly increased sales velocities this year, following a 20 percent rise in transactions in 2010.
Further north in Big Sky, Montana, the super-premium Yellowstone Club posted more than $100 million in sales after new ownership brought new capital, new management, and much-needed stability to the resort.
And in the mountains of North Carolina, real estate brokers are gearing up for an active summer following a relatively quiet 2010.
After two years of tough times, America’s second-home market is beginning to show signs of life in select markets, thanks to increasing confidence in the economy, targeted marketing of properties to select segments, and a desire by many baby boomers to get on with their lives.
“Second-home activity is picking up in many markets,” says Chris Chaffin, vice president of development at Beaufort, South Carolina–based Chaffin Light Management and chair of ULI’s Recreational Development Council (Silver). “I think 2011 will be a stronger year than 2010 and really set the foundation for a great year in 2012.”
Adds Christopher Kelsey, a partner in Whitefish, Montana–based Steeplechase Development, a resort development firm, and founder of the Kelsey & Norden Resort Real Estate Survey, a research group focused on resort real estate consumers: “There is significantly more activity today in the second-home market than a year ago. That activity varies from market to market and even project to project. Transaction volumes and new home construction have increased, particularly at the premium levels in primary markets with strong fundamentals.”
|A second home designed by the noted global design and planning firm of Hart Howerton nears completion at the Santa Lucia Preserve – a conservation-based community preserve”of 280 homes on 20,000 protected acres — in Carmel Valley, California.
Photo credit: Hart Howerton
Suncadia, a resort 80 miles (128 km) east of Seattle, Washington, in the Cascade Range, reported a huge rebound in sales velocity in 2010, chewing through the majority of its distressed inventory and nearly all the standing inventory of custom homes, says Kelsey, assistant chair of ULI’s Recreation Development Council (Blue). “The surge was, in part, due to the developer’s completion of an unfinished golf course and the addition of a new winery and restaurant within the resort that gave consumers confidence that the project was viable despite the downturn.”
The majority of people who sought second homes still want them, he adds, but many can no longer afford them. Buyers believe that they need to be absolutely sure that a purchase will suit them for the long term; they no longer are thinking of second-home purchases as investment vehicles.
Kelsey notes that over half of baby boomers surveyed recently said their second residence will be their retirement home. “This spells huge opportunities for developers in the right environments to accommodate the needs of retirees—both to attract new customers and to keep the ones you already have for longer,” he points out.
Chaffin says he hears from brokers across the country that after the Great Recession of the past few years, people are ready to get on with their lives. “People feel comfortable moving forward to buy a second home now because they don’t feel there is going to be an appreciable drop in their net worth anytime soon,” he continues. “Others realize they are getting older and have only a certain amount of quality time.”
Potential new entrants in the market should focus their efforts in primary markets and secondary markets with demonstrated consumer demand, Kelsey advises. “Don’t attempt to create a market that doesn’t already exist,” he says.
Chaffin emphasizes that entrepreneurs should know the market thoroughly. “Don’t build something people don’t want—especially in the recreation development business, where buying decisions are purely discretionary. An old bull once told me that if you build bad product, people won’t buy, and you can’t make them buy. Market identification and product definition—those are two keys.”