Newly confident and deep-pocketed consumers are driving vacation-home sales to levels that have not been seen in a decade, said panelists at the ULI Fall Meeting. But prices have not yet reached previous peaks, and buyers are increasingly cautious and cost-conscious.
Session moderator Kurt Culbertson of Design Workshop kicked off with a U.S. market overview presented by Adam McAbee of Meyers Research, a Kennedy Wilson company. “What a difference a decade makes,” said McAbee, pointing to the following market trends:
- Last year (2014) saw record-breaking vacation-home sales—over a million units, 6 percent above the 2006 peak, with 71 percent of sales in the southern and/or western states, according to the National Association of Realtors. But that is not a reason for novices to jump into the market; McAbee does not expect another record-breaking year in the near future.
- The 2014 median home sale price of $150,000 has not yet topped the 2005 peak of $204,100; however, it is well above the 2011 low of $121,300.
- Approximately 43 percent of sales are in resort and urban areas, with the relatively new urban sector gaining ground.
It’s a tough job, but someone had to do it: McAbee personally visited all 17 new second-home communities in the neighbor Hawaiian Islands of Maui, Kauai, and the Big Island to compare current property characteristics, consumer demand, and sales with those of a decade ago. According to his survey, which focused on properties with at least ten years of experience selling vacation homes, he found that:
- Most buyers are still over the age of 50. However, the percentage of buyers in their 30s has doubled from 7 to 14 percent.
- In 2005, nearly half of buyers were empty nesters; today, families with children living at home represent the largest cohort of buyers.
- More than half of buyers have a net worth exceeding $10 million.
- While product type, home design, and amenities remain key buyer considerations throughout the years, today’s buyers show increased concern about price and carrying costs.
- Most sales are all-cash, but many buyers—even the wealthiest—are financing their second-home purchases to take advantage of today’s low interest rates.
- The perceived risk of buying a second home—virtually nonexistent a decade ago—is now moderate to high.
- One of the most dramatic changes over the last decade has been in amenities. A decade ago, buyers were content with golf, pools, and spas. But today’s buyers tend to be multigenerational families focusing on wellness and an active, outdoor lifestyle. While golf will likely remain in the menu, other less time-consuming activities such as tennis and even farming are moving to the forefront, he noted.
- Home designs have changed radically as well. “There are no more McMansions,” said McAbee. “It’s about a home size that people will use, rather than one they can show off.” Buyers want an understated contemporary look with efficiency of design, ample outdoor living space, and green features that minimize energy costs.
To meet these evolving consumer demands, developers are responding with some stunning offerings. The 450-acre (182 ha) Kohanaiki resort on Hawaii’s Big Island will offer an 18-hole Rees Jones golf course, sports complex, and a 67,000-square-foot (6,200 sq m) clubhouse with everything from a spa, fitness center, movie theater, kids’ club, and bowling alley to an adults-only cigar lounge, wine-tasting room, and on-site craft brewery. Its on-site organic farm will grow 60 varieties of fruits, vegetables, and herbs for use by on-site restaurants and homeowners. Prices range from $2.8 million for luxury residences to $14 million for a custom home site.
Other notable examples include the Stellar Collection of residences at the Northstar ski resort near Lake Tahoe. These contemporary, freestanding homes, ranging from 2,100 to 3,400 square feet (195 to 316 sq m) and priced at about $1,000 per square foot ($10,800 per sq m), were designed by the same team that imagined Apple’s flagship retail stores. In Deer Valley, Utah, the new Stein Eriksen residences range from 2,100 to 8,200 SF (195 to 762 sq m) and are priced at about $1,200 per square foot ($12,900 per sq m). Both of these new communities offer spectacular mountain views and ski-in, ski-out access.
Ski resort destinations are booming, said Craig Ferraro of East West Partners, thanks in part to Mother Nature’s gift of snow after several disappointing years. His company attracts new buyers with innovative amenities such as a winery, a highly popular six-hole golf course that “makes golf fun again,” and even on-site lodge-keepers who provide authentic ties to the local community.
And what about millennial buyers? Said Richard Severance of the St. Joe Company: “They travel in packs with their friends, and do a lot of online research before buying, so sales associates really have to be on their game.” Noting that millennials tend to like “weird, odd things,” Severance said that St. Joe is considering offering “glamped-up” Airstream travel trailers in a secondary market. Ferraro said that his firm is not seeing many millennial buyers; however, “they do try to convince their parents that this is where we will come to visit you.”