Industry outsiders might be surprised to learn that even in this struggling economy, second-home purchases are still taking place. And while sales of second homes – whether for investment purposes, vacation homes or future retirement residences – have slowed, some second-home specialists report things are already looking up.
By K.K. Snyder
Working as an A.G. Edwards financial planner for 11 years gave Marian Schaffer a solid background in retirement planning. Though she left the corporate world to stay home with her children full time, she missed working with people and helping them plan their futures. In the meantime, Schaffer began looking for investment properties in early 2000, venturing to markets in the southeast such as North Carolina.
“Looking for property, I realized there was no source to help people find what they were looking for,” she recalls. While some sales staff she dealt with had enough information to draw clients to their specific area or development, few had any knowledge of the overall market to offer potential buyers.
So when Schaffer decided to rejoin the workforce in 2002, it was natural for her to shift gears from financial planning to becoming that “go to” person, specializing in a niche market of retirement, second-home or vacation property and providing comprehensive services to her clients. Unlike the agencies she’d worked with as a potential buyer, she wanted Schaffer Realty Group to offer the much-needed services, but without the slant or bias she’d recognized as a client.
“Once in the market, I saw so many people who bought property, whether for an investment or thinking it was where they would like to retire, only to find out that it was not where they wanted to build or not a good investment; maybe the market had corrected or their circumstances in life had changed,” she explains. “So now there are all these communities out there with vacant lots.”
Schaffer works with developers and buyers, offering her services to both in order to match the right buyer with the right community. She does that not only by relying on her team of MLS agents throughout the southeast, but also by taking research trips to the areas she markets.
Information she gathers includes details about the town’s hospital system, airport access, recreational opportunities, nearby colleges offering adult education, the tax structure, state taxes and how they treat pension income. She also researches developers and works with an exclusive group she personally selects.
“I want to help them make the right decision the first time around and help developers get the right people to buy and build in their communities and use their amenities,” she says.
With all of that information at her disposal, Schaffer then gets a comprehensive picture of what her client is looking for and analyzes the information to provide them with a short list of destinations matching their needs.
Today, though based in Libertyville, Schaffer specializes in second-home markets in Florida, Georgia, North and South Carolina, Virginia and Eastern Tennessee, noting that current hot spots for second-home purchases are Eastern Tennessee, Western North Carolina and the coasts of North and South Carolina.
Back in Chicagoland, a number of developers and agents report second-home sales are holding strong these days, though there was a slow period that matched that of the overall real estate industry. Today’s second-home buyers are all about what a community can offer them and their family, says Tammy Barry, sales and marketing consultant for developer Tom Heimsoth’s Heritage Harbor in Ottawa, Ill., a second-home marina resort on the Illinois River, just over an hour from downtown Chicago.
“People looking for second homes want a place where they can create traditions and memories with family that they don’t always get to do in daily life when they are busy running to soccer games and school events,” she says.
Though still in the early stages of development, the 142-acre property includes 32 acres of water and a variety of residential products, ranging from single-family “cottage homes,” to townhouses or “row cottages,” to “very upscale condos,” says Heimsoth, adding that the property will have 750 units at full build out.
“We only have a few units up and occupied,” he says. “Obviously, we’ve been affected by the economy, and we just started to sell in 2008 so this is our first summer of real active selling. We started to see a swing in February of attitudes, and when the weather warmed up in April, we really started to see a lot of traffic. We recently had 100 people through here in two days, which is almost unheard of in this economy.
“It’s hard to explain buyer behavior at this point, but some research I’ve read says the second-home market tends to turn around faster than the rest of the market.”
Due to the lukewarm market, Heimsoth made the decision to develop some lower cost products on the resort, maintaining the quality of the cottage homes, “but somewhat scaled down to lower the price points with a smaller square footage,” he said, noting some success with that change already. The community now offers a product that isn’t on the water, but close by, for as low as $190,000. Waterfront properties start at $240,000.
Barry recognizes that while some buyers are looking to purchase second-home or vacation property purely for enjoyment with family and friends, others are searching for investment opportunities outside the stock market. Either way, all buyers want property that will retain its value once the market levels out.
And while the current market has created a balloon of available properties in the second-home inventory, houses are still being bought as second-home properties at an average of $2 million in the Lake Geneva market, says Steve Beers, president of the real estate division of Keefe Real Estate in Lake Geneva, Wis., where the property turnover is less than 1 percent annually.
“A bigger inventory can be daunting for buyers faced with so many more choices,” says Beers. “But those people are usually a little more discerning and many times will start looking for a house many years before they buy, though we still have those who come up and make an impromptu purchase. More often, though, those potential buyers come up, spend the weekend and then the agent doesn’t hear from them.”
Because of that behavior, Beers tells his agents to keep potential buyers in their database for up to five years, knowing the long-term planning of many second-home buyers. “Second-home buyers generally have a little broader range in affordability. If they don’t’ see something in their initial price range, they will move up. Financing is not an issue and sometimes they even pay cash for a several million dollar purchase,” explains Beers.
Also in the early stages of development, the 530-acre not-for-profit Harbor Shores Resort in Benton Harbor/St. Joseph. In the planning stages are 800 units of various residential products at build out over the next 10 to 20 years, and the development accepted over 100 $1,000 reservations since pre-sales began in July 2008. Offering an aggressive referral fee of 5 percent has helped draw potential buyers to the development.
“It’s been a mixed bag,” says Ron Eng, director of marketing and sales, regarding the profile of people voicing interest in second-home property in the Signature Jack Nicklaus Golf Course, Lake Michigan community being marketed as the “first beach and signature golf resort community 90 minutes east of Chicago.”
Harbor Shores offers two marinas, with river frontage on the Paw Paw and St. Joseph Rivers. Prices range from $175,000 for a 70-by-120-foot single-family custom home site to cottages priced from $350,000 to $650,000.
“Seventy percent of the group is local based and 30 percent is Chicago and North Indiana based,” Eng says, regarding current potential buyers. “A lot of folks are looking for a second home that will eventually be a retirement home, but younger folks in their mid-40s are looking at it as an investment or even their primary home.”
Eng and Kerry M. Wright, lead property specialist, say the demographic surprised them, as they expected the majority of interest to come from the 55-70 age group. “But that group is experiencing shrinking finances,” shares Eng. “No one needs to buy a second home, they want to. In this economy, their propensity and ability to buy has changed.”
While industry conferences tout reasons for second-home purchases being all about lifestyle, amenities of a property and trying to “buy the dream,” Eng believes there has been a shift, making the priority for purchasing a second home more about buying in a market closer to home because of gas prices and fear of travel.
“We have a population base of 22 million people within a three-hour driving range,” adds Wright. “People are interested in having that second home a stone’s throw away from where they live.”
As to the future of the second-home market, Schaffer says the days of folks retiring and automatically moving to Florida or Arizona are over. “Over the next decade, I think the numbers will illustrate that Eastern Tennessee and North and South Carolina are going to see a great influx of retirees and second-home buyers.
“Many retirees are in their 50s and 60s and are in great health,” says Schaffer. “They want moderate weather, but they are active and not just lying around. It’s not unusual for someone to come to me and say, ‘I want to fly fish and hike and sail,’ unlike years ago, when they said they wanted to garden, walk on the beach and visit with their grandchildren. The term ‘retirement’ has really changed.”
Schaffer says her niche market can be a tough one, and just as she doesn’t pretend to know all there is about the Chicago market, agents with little knowledge of major second-home destinations in the southeast shouldn’t think it’s an easy market to conquer. However, she offers a referral fee to anyone that sends a client to her agency, which can lead to a successful transaction for buyers and agents alike. C.A.
Sales and Marketing Consultant
President, Real Estate Division
Keefe Real Estate
Director of Marketing and Sales
Schaffer Realty Group