Unlocking the Door to Second Home Investment: A Comprehensive Analysis

Second homes are a smaller slice of the market than most people assume, and NAR’s data on who’s buying them (and why) is worth a look if you’re considering one. I’m Robbie English, REALTOR and Managing Broker at Uncommon Realty.

Primary home purchases have climbed to about 70% of transactions, up from 65% over the last three years. Against that, vacation home purchases have dropped for three straight years running, from 16% down to 12%, though that’s actually in line with the historical average since 2003, not a new trend. Investment-property purchases have held steady at 19% of transactions for three years running.

Vacation and investment buyers take on more distressed properties (short sales or foreclosures) than primary-residence buyers do, 38% of vacation buyers and 35% of investors compared to just 9% of primary buyers.

Generationally, the second-home market used to skew toward baby boomers. Gen X has been gaining ground and is now catching up. Both Gen X and Gen Y second-home buyers tend to cite family time and recreation as motivations more than the older generation did.

Income, not age, turns out to be the better predictor of who buys a second home. Vacation-home buyers have a median income around $89,900, investment buyers around $82,000, and primary-residence buyers around $75,000 (the national median household income is $57,617 for comparison).

Vacation homes tend to cost more and sit farther from the buyer’s primary residence than investment properties do. Median vacation-home sale prices have outpaced investment-property prices for the past decade, with the gap widening to over $45,000 as of 2016. Vacation homes run slightly smaller on average (about 1,460 sq ft vs. 1,500 sq ft for investment properties), and about one in five vacation-home buyers travel over 1,000 miles to reach the property.

Investment buyers behave differently: about half of investment properties sit within 20 miles of the buyer’s primary home. Both groups lean toward single-family homes, but investors tend toward urban and suburban settings while vacation-home buyers go for rural and resort areas.

Foreign buyers factor into this too, often choosing resort destinations with direct international flight access. And a good number of vacation-home buyers treat the purchase as an investment in its own right, thinking about rental income, appreciation, or a future retirement home.

If you’re weighing a second home, whether for family use, rental income, or eventual retirement, I’m Robbie English, REALTOR and Managing Broker at Uncommon Realty, and I’d be glad to talk through what makes sense for your situation.

Statistical Source: National Association of REALTORS’ 2023 ‘Home Buyer and Seller Profile’