Thursday, June 22, 2006

Interesting second home article

We have seen heathly price appreciation over the last few years as the baby boomers prepare to retire. I believe there is still plenty of time to particiate in the results of this demographic shift in addition to several other factors that are driving our market. I think it is important to consider the biggest group of the boomers are in their 40's now (1/3 more than in their 50's). We are seeing large numbers of people in their 50's looking to secure a place in Steamboat and quite a few in their 40's looking to relocate now that they have the flexibility to raise their family where they want to vs. where their office is.

This is likely to have a pretty strong impact on the real estate market in Steamboat Springs even if the economy encounters some serious bumps. Baby boomers have high expectations for an active retirement and they are in a better position to buy second homes than any previous generation. I see it first hand several times a week. In resort towns like Steamboat Springs, second homes don't necessarily have to be differentiated from investment homes. In most cases, with prices appreciating and the possibility of short-term rentals to offset some expenses, a second-home can be a good investment and the owner can have the best of both worlds.

Give me a call or send an email for more thoughts on where the real estate market is going, a strategy to get into the market based on your goals or for straight forward answers to your questions.

Washington, D.C. -- The National Association of Realtors reports that vacation properties account for 12 percent of all homes sold last year, and 28 percent of homes were bought for investment purposes. Typical vacation buyers last year were 52 years old, earned $82,000, and purchased a property that was a median of 197 miles from their primary residence. This profile differed from that of investment homebuyers in just one key respect: investment homes were likely to be close to the original home.

USA Today explains this rally in vacation and investment homes began in 1997, when Congress changed the tax code, allowing most homeowners to duck capital gains when selling their homes. The exemption is $500,000 for married couples, $250,000 for singles, if it was their primary residence for two of the previous five years.

Before, the only way to avoid the tax was to use the gained equity to buy another one of equal or greater value. But now, they can downsize and use the money instead to buy a second home.

Something else is going on. Many baby boomers are entering their peak earning years. The most active buyers of vacation and investment homes are people in their 50's. Currently there are 36 million people in that age bracket. However, with 45 million people in their 40's, the market is expected to remain strong for a long time.

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