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A second home for a fraction of the price

 

It’s not your imagination: Everyone really does want a second home.

Once considered a luxury reserved for the ultra-rich, the pandemic hastened many Americans’ desire to invest in a getaway property.

There has been a 20% increase in people who are interested in owning a second home now compared to pre-Covid times, a trend that’s likely to continue after the pandemic.

That’s the finding from the Second Home Sentiment Report, a survey conducted by Pacaso and The Escape Home, two businesses recently launched to serve this growing market. Pacaso is a service that helps people buy, share and manage their vacation home, and The Escape Home, well, you’re here now, reading this newsletter.

The report relies on data from two surveys of more than 2,000 respondents: one conducted online in November 2020 and another between October and November specifically of second home seekers.

Key findings:

  • Men account for roughly 70% of people who initiate the second home-buying process.
  • The West Coast vacation market is seeing major growth and changes in location demand.
  • 28.8% of people are spending more time in their second homes during Covid, but less than half of owners use them for more than four weeks of the year.

Men’s interest in searching for and purchasing a second home is noteworthy because it’s a departure from the purchase of primary homes — where 91% of the decisions are driven by women. According to the survey, men account for roughly 70% of people who contact Pacaso.

This is also significant in a pandemic where women have shouldered a disproportionate share of the care burden during Covid, juggling work, homeschooling, elder care and navigating safety. Indeed, although 70% of women who responded said they believe their husbands have more real estate knowledge, 60% also said he has more time.

The West Coast housing market has been surging, according to the survey. A recent Redfin report of U.S. housing markets confirms as much, listing three California counties along with Deschutes County, Oregon, among the 10 hottest areas for growth this year.

“The markets where we are seeing the most activity have historically been popular second-home destinations,” Austin Allison, co-founder and CEO of Pacaso, said. “The biggest markets for us are Napa Valley, which includes Sonoma and Lake Tahoe. Those are the biggest markets in Northern California. In Southern California, we are seeing the most interest along the coast, from La Jolla, all the way up to Santa Barbara and Palm Springs.”

The factors fueling this are many with two primary drivers: Covid has offered more people work-from-home flexibility and online services such as Airbnb and VRBO allow buyers to more easily rent out their homes. Airbnb’s initial price offering this week values the company at a whopping $47 billion.

Letty Vermeulen, founder and CEO of boutique real estate brokerage Aspire Los Angeles, has observed similar trends in the market around Los Angeles.

“I’m seeing most of the people looking to purchase in Lake Arrowhead, Big Bear, Piedmont, Idyllwild and Palm Springs,” she said. “We’re definitely seeing a trend into more people getting vacation homes. I think a big majority is for income purposes. But I also think that people are thinking they can work from anywhere right now, so why not work part of the year from a nice cabin in the mountains?”

When it comes to location, most people want their vacation homes near the water, although the mountains are a close second. Another trend: 71% of people prefer being able to drive to their second home, whereas only about a quarter choose flying.

Whether by car or plane, though, actual usage of vacation properties seems underwhelming compared to the demand.

While 28.8% of people reported spending more time in their homes now than before the pandemic, 52.9% said their visiting patterns haven’t changed. This is a driving factor of Pacaso’s business model, where users can buy shares of a specific vacation home, to avoid letting an entire home go unused for most of the year, or as Allison calls it, “underutilization.”

Among Pacaso’s current listings: a 6-bedroom, 8-bathroom (!) property in Hilton Head, S.C., for $489,000 — a price representing one-eighth ownership of the home.

“If you were with a group of people who own second homes and you were to ask them how often they use their second homes,” he said, “most people would say somewhere between 4-5 weeks per year, which means the homes sit vacant for 10-11 months a year.”

Unless you collect income when not there. About half use their home for personal use only, while another half rents out the home for short-term tenants.

“Most of the people that I have in my network go maybe once a month or once every two months,” Vermeulen said. “There’s a heavier focus on renting it out, but they still utilize (their homes).”

While 87.7% of second homeowners surveyed bought their house before Covid, 12.3% bought during the pandemic.

The report only captures a moment in time in the second home market — how vaccinesreopening of office spaces and other trends in real estate and the economy affect housing remain to be seen. But Allison says life during the pandemic offers a glimpse of the future of space, family and vacation.

“Covid has changed preferences, behaviors and desires for people in just about all facets of life,” he said. “It’s no surprise that more people than ever dream of owning a second home. For those lucky enough to have one, second homes have become a refuge, providing a change of pace and a place to create special rituals. As we enter a world where we can put Covid behind us, we expect to see interest in second homes continue to grow.”

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