As you sit in traffic staring at the rear fender of the car in front of you, take a look at the license plate. According to the annual report released by the National Association of Realtors (NAR), chances are it won’t be local. Nationally, 3.34 million second-home purchases were recorded in 2005; setting sales records and continuing the seven-year annual trend of ever increasing second-home buying. A trend that many attribute to the tax reforms of 1997.
Taxes Cause Change
After the tax law reforms of 1997 allowed home-sellers to exclude up to $500,000 of their appreciation from taxation, a surge in second home buying took place. Before the reforms went into effect, homeowners had to sell and trade-up into more expensive homes to avoid the capital gains tax. Past years of record appreciation allowed homeowners to sell, then purchase a less expensive home and still have money for a second home in their favorite vacation destination. In 2005, vacation-home sales increased 16.9 percent from 2004, to a record 1.02 million.
"Vacation home buyers, unlike investment buyers, are driven by lifestyle considerations; purchasing for enjoyment and not the need of rental income or portfolio diversification," says David Lereah, chief economist for National Association of Realtors in his outline of the annual report.
Lereah gives the baby boom generation a great deal of credit for the continued increase in vacation-home buying. Peak income-earning years, coupled with low-interest rates, have helped baby-boomers reach record levels of secondary homeownership. Of these vacation home purchases, 40 percent of vacation buyers wanted to be close to an ocean, river or lake; 27 percent close to preferred recreational activities; and 26 percent wanted to be close to the mountains.
Where Do Carlsbad Vacation Owners Reside?
According to the report released by the NAR on second-homes, the median distance between a vacation-home buyer’s primary residence and second home is 49 miles. 88 percent of these buyers travel to their property by car. After analyzing data from more than 25,000 households recorded in Carlsbad, 26% of all attached units in Carlsbad are second-homes and about more than half are owned by those outside of San Diego County. Only about 10% of detached homes in Carlsbad could be considered vacation homes. Residents of Los Angeles, Phoenix, Las Vegas and Orange County have found their way to purchasing a second or third home in our beautiful city.
Be sure to tune into the Travel Channel during the week of June 12, as Carlsbad and Oceanside are featured in an exclusive on vacation homes.
Local Market Update
If you track the local real estate market, keep your eye on interest rates and the supply of homes, which play a large part in the stability of sales prices. If interest rates move up, sales prices could lessen with the decreased purchasing power of the hopeful home-buyers. For almost two years, the Federal Reserve has been raising short-term interest rates in an effort to keep inflation contained. The effect has been a slow, steady rise of mortgage rates causing them to currently hold at around 6.5%. The local supply of homes is between 7 and 8 months, creating a competitive and stable market.
In the face of rising interest rates and increased competition, single family homes have continued to sell, since the start of the year, keeping close pace with 2004 and 2005. The average sales price has dipped slightly in April-May to $830,000 for the average 2,500 square-foot home. The average attached home’s average sales prices have remained stable. Two-bedroom condominiums are selling for around $460,000 and $515,000 for a three-bedroom. The market time remains around 60+ days to sell, as it has for almost a year.
New Construction
Market Point, a San Diego based company tracking real estate statistics of residential new construction wrote in their quarterly report that the northern San Diego market remains strong in sales despite a fifth consecutive quarter of record high active projects for sale.
Taxes Cause Change
After the tax law reforms of 1997 allowed home-sellers to exclude up to $500,000 of their appreciation from taxation, a surge in second home buying took place. Before the reforms went into effect, homeowners had to sell and trade-up into more expensive homes to avoid the capital gains tax. Past years of record appreciation allowed homeowners to sell, then purchase a less expensive home and still have money for a second home in their favorite vacation destination. In 2005, vacation-home sales increased 16.9 percent from 2004, to a record 1.02 million.
"Vacation home buyers, unlike investment buyers, are driven by lifestyle considerations; purchasing for enjoyment and not the need of rental income or portfolio diversification," says David Lereah, chief economist for National Association of Realtors in his outline of the annual report.
Lereah gives the baby boom generation a great deal of credit for the continued increase in vacation-home buying. Peak income-earning years, coupled with low-interest rates, have helped baby-boomers reach record levels of secondary homeownership. Of these vacation home purchases, 40 percent of vacation buyers wanted to be close to an ocean, river or lake; 27 percent close to preferred recreational activities; and 26 percent wanted to be close to the mountains.
Where Do Carlsbad Vacation Owners Reside?
According to the report released by the NAR on second-homes, the median distance between a vacation-home buyer’s primary residence and second home is 49 miles. 88 percent of these buyers travel to their property by car. After analyzing data from more than 25,000 households recorded in Carlsbad, 26% of all attached units in Carlsbad are second-homes and about more than half are owned by those outside of San Diego County. Only about 10% of detached homes in Carlsbad could be considered vacation homes. Residents of Los Angeles, Phoenix, Las Vegas and Orange County have found their way to purchasing a second or third home in our beautiful city.
Be sure to tune into the Travel Channel during the week of June 12, as Carlsbad and Oceanside are featured in an exclusive on vacation homes.
Local Market Update
If you track the local real estate market, keep your eye on interest rates and the supply of homes, which play a large part in the stability of sales prices. If interest rates move up, sales prices could lessen with the decreased purchasing power of the hopeful home-buyers. For almost two years, the Federal Reserve has been raising short-term interest rates in an effort to keep inflation contained. The effect has been a slow, steady rise of mortgage rates causing them to currently hold at around 6.5%. The local supply of homes is between 7 and 8 months, creating a competitive and stable market.
In the face of rising interest rates and increased competition, single family homes have continued to sell, since the start of the year, keeping close pace with 2004 and 2005. The average sales price has dipped slightly in April-May to $830,000 for the average 2,500 square-foot home. The average attached home’s average sales prices have remained stable. Two-bedroom condominiums are selling for around $460,000 and $515,000 for a three-bedroom. The market time remains around 60+ days to sell, as it has for almost a year.
New Construction
Market Point, a San Diego based company tracking real estate statistics of residential new construction wrote in their quarterly report that the northern San Diego market remains strong in sales despite a fifth consecutive quarter of record high active projects for sale.