Vacation Home Sales Soared During the Pandemic. Should You Buy One?
Vacation homes grew popular this past year, but is buying one a good idea?
The demand for homes has soared during the pandemic as low mortgage rates made it a more attractive time to buy. But it's not just primary homes that buyers have been looking to scoop up. Vacation home sales have also soared in the course of the pandemic.
In 2020, vacation home sales rose by 16.4%, according to the National Association of Realtors, outpacing the 5.6% growth in total existing home sales. Meanwhile, vacation home sales between January and April of 2021 climbed 57.2% compared to that same period in 2020.
What's fueling that trend? The fact that so many people are being given the green light to work remotely on a long-term basis has made vacation homes more appealing. After all, why stay in the same home when you can travel back and forth between two properties and enjoy a change of scenery?
Vacation homes have also served as a nice escape during the pandemic, particularly for city dwellers who may have, at many points over the past year, grown tired of being cooped up in smaller apartments.
Should you buy a vacation home?
If you have money that can serve as a down payment on a vacation home and you're confident you can qualify for a mortgage, then you may be thinking of buying a second property in the near term. But before you do, ask yourself these questions.
1. Will owning a second home be a strain on my budget?
It may be the case that you can technically afford to pay off a second mortgage. But will that cause you undue financial stress or put you at risk of falling behind on your other bills? Make sure a vacation home fits comfortably in your budget.
2. Is it worth paying a higher price for a vacation home?
Right now, home values are inflated on a national level, so if you buy a vacation home, you might pay a lot more in the near term than you would in a normal housing market. What's more, a big reason home prices are so high is that inventory is very limited. But in some vacation spots, inventory is even harder to come by, so make sure you don't get stuck grossly overpaying for a property you'll then need to keep up with.
3. What's my goal in having a vacation home?
Maybe you want to buy a vacation home so you have an easy place to escape to as needed. Or maybe you're thinking of buying one as an investment. If you're motivated by the latter, make sure you're buying in an area that's renter-friendly. Some vacation hotspots have strict rules about renting out homes for short-term stays, so talk to a local real estate agent who can help you determine how likely you'll be to enjoy a steady stream of rental income.
Tempting as it may be to buy a vacation home, it's the sort of decision you'll need to consider carefully before diving in. And if you do decide to move forward with a vacation home, don't be shocked if it costs a lot more than expected.
Buying a second home could be a smart move, but you also may want to wait until property values come down a bit. Sitting tight until next year could make a huge difference, especially if you're buying that home as an investment more so than anything else.
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