INVESTING 2nd house is home sweet home for funds

Many buyers are trading their stocks and bonds for real estate.
DALLAS MORNING NEWS
NEW ORLEANS -- Americans who seek a haven from the ravages of the stock market are putting more of their money in second homes.
The number of buyers using money cashed out of securities to acquire second homes has more than doubled during the last two years, according to a new study from the National Association of Realtors.
"When you look at the source of funds for people who bought a second home since 2000, equity in stocks or bonds was used by 16 percent," said Dennis Hanlon, a Colorado real estate agent who heads the National Association of Realtors' resort-home forum.
"For people who bought second homes prior to 2000, the sale of stocks and bonds accounted for only 7 percent."
Trend-breaking
The current move runs counter to historic trends, which say the second-home market slumps during a bad economy.
"It's a segment of the market bought with discretionary money -- people don't have to buy second homes," said Hanlon, who spoke at the Realtors association's annual meeting in New Orleans earlier this month.
Sales of securities are now the second most common source of equity for second-home purchases, behind money taken from savings, the association found in a new survey of thousands of second-home buyers.
Forty percent of Americans who said they were considering buying an additional home said they are now more likely to buy because of instability in the securities market.
And more than a third of recent second-home buyers surveyed said they were more likely to buy a third home because of the stock market shake-up.
"I don't think it's coincidence that we've had extreme volatility and some tumbling in the stock and bond market," said David Lereah, chief economist with the National Association of Realtors.
"They are putting whatever money they would have put into the stock market into real estate. They are looking for more stable investments."
Not just the wealthy
Contrary to popular perception, the second-home market is not reserved for the super-rich.
"It's very obvious from the survey that everyone is participating," Lereah said.
The typical second-home buyer in the United States has a household income of $76,900 and buys a property valued at about $150,000.
Almost 80 percent of the buyers bought the second home for their family's use, not primarily as an investment.
And more than half the houses were within 200 miles of the buyer's primary home.
The majority of second-home buyers said they use the property as a family retreat, for vacations or as a retirement home.
About 31 percent of second-home owners -- the biggest share -- use their properties one to three months a year.
"The second-home marketplace is now significant, and it's growing," Lereah said. And second-home buyers are seeing even greater return on their investment than standard homeowners, he said.
"Anecdotally, we are seeing big rises in home-price appreciation in second homes," Lereah said. "It appears to be in the double digits, and in some areas even high double digits."
Nationwide, median home prices are up about 8 percent this year, according to the Realtors association.
Predictions
The average age of second-home buyers is 61, and the market is being fueled by baby boomers, Lereah said. "There will be a greater demand for second-home buying because you have a bigger population coming into that age group," he said.
Some economists predict that the flight of capital from securities to property investments will continue.
"The stock market, I think, is going to continue to be weak," said Timothy Ryan, an economist and dean of the University of New Orleans' business college. "But baby boomers still have a lot of money to invest, and I think a lot of that will go into real estate."
Individual investors will re-evaluate their strategies when the securities market begins showing solid gains, Ryan told real estate agents. "I think baby boomers are still in love with the stock market."
Contributing to the current increase in second-home sales has been the growth of the Internet as a marketing tool, some industry analysts say.
"Our buyers and sellers in almost all cases do not live where we do, so Internet sites for us are crucial," Hanlon said.
Many second-home buyers are finding that their purchases are some of the best real estate buys they make, said Clark Thompson, president of California-based Escapehomes.com.
"It's like buying California real estate in the '70s," he said. "I really believe there are areas that will be phenomenal for investment."
The appeal is so strong that some second-home buyers are leveraging their first house to make the purchase, he said.
"Where there is high equity in their homes, they are taking money out and using it to invest in second homes," Thompson said.