Open House by Jim Woodard

With temperatures warming and summer just around the corner, many people are getting the itch to buy or build a vacation home. Fueling that itch is news that the average price of a second home is down about 23 percent since 2007.

The median price of the typical vacation home is about $150,000 — down from $195,000 in 2007, says a National Association of Realtors report. As a point of comparison, the median price of a vacation home was about $204,000 in 2004. The survey found 80 percent of vacation and investment property owners agreed that current conditions constitute a buyer's market.

"The long-term underlying demand is favorable for vacation homes because of the large number of middle-age and middle-income Americans that buy these properties," said NAR Senior Public Affairs Specialist Walter Molony. "These have long been the primary buyers of vacation homes.

"In recent years, this market has been driven by the baby boomers, but there are now two even larger population groups coming up right behind them. Those younger segments will continue to fuel the vacation home market for the next 10 years."

Many people who dream of a quiet vacation home are getting more serious about activating that plan. "I can tell you that people who would never have purchased a detached single vacation home on the coast are now seriously considering it," said Christine Karpinski, author of "The Vacation Rental Organizer." "Homes that would have once cost $3 million have now fallen to $1.5 million. Today's buyers know that the price won't stay down long. They may never be this low again."

The survey shows 34 percent of consumers purchased vacation properties within 100 miles of their primary residence. That suggests they intend to use the homes themselves, as opposed to renting them or selling them for a profit.

An increasing number of families are turning to manufactured vacation homes, the survey found, because they can cost between 20 percent and 50 percent less per square foot to erect than comparable site-built homes.

Many owners of vacation homes are finding that renting their property when they're not using it is increasingly lucrative. Rents tend to remain high or are rising in many areas, while purchase prices have been decreasing.

Q: Are home builders becoming more confident?

A: Confidence in the market expressed by home builders picked up substantially in April, says a report by the National Association of Home Builders. Builder confidence is at its highest point in nearly seven years.

New home sales, inspections by prospective buyers and expectations lifted significantly in March, according to a separate survey conducted by noted real estate researcher and consultant John Burns.

Improvements in the market can be partially attributed to seasonal factors.

Of course, market activity and trends differ in different regions. But future sales potential is very positive, according to most of the surveyed builders. That was the case in all regions except in the Northwest, said the NAHB report.

Interestingly, the report noted 18 percent of surveyed property buyers have purchased land as an investment. About 29 percent indicated they plan to buy land in 2009. By 2010, 47 percent expect to buy land.

Q: Is the rate of home sales increasing or decreasing?

A: A recent housing report shows the decline in home sales slowed significantly in March compared to sales in March 2008. Home sales in March were down only 5.8 percent when compared to March 2008. That's the best performance on a year-over-year basis in the last 18 months, according to Real Trends, a real estate research and publishing company.

Home sales in March showed improvement in all regions, a welcome surprise in light of other economic news that shows continued weakness in retail sales and employment, the report said.

"March results show that low interest rates, soft home prices and high levels of affordability are countering other more negative news in the economy," the report stated. "Home prices that have been under pressure for three years now are starting to firm somewhat - a trend that may continue in the months ahead. Doubtless, the first-time home buyer tax credit, the loosening of underwriting guidelines for FHA mortgages, and the Fed's intervention to lower rates are all factors assisting with the housing recovery."

Q: Are Federal Housing Authority mortgages becoming more popular?

A: Mortgage loans insured by the Federal Housing Administration are playing a major role in stimulating home sales. These loans account for about 20 percent of new mortgages. That's up from 3 percent in 2006.

FHA mortgages are particularly helpful in making homes more affordable for families. Some FHA loans require small down payments, and qualification requirements are flexible. Also, the number of qualified FHA lenders has increased fivefold in the past two years.

Another advantage of today's FHA mortgages: They provide easy modification procedures for borrowers who fall behind on payments. The loans can be readily refinanced if interest rates decline. There are no income restrictions on FHA loans, so even affluent buyers may find these loans to be the most attractive in today's market.

It should be noted that FHA loans still require a pre-settlement inspection of the property, but that process has been simplified significantly.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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