My House

American Demographics, June 1, 2002 by John Carroll

Byline: JOHN CARROLL

In 2000, money manager David Callan bought his first summer home: a 2,800-square-foot residence in Avalon, just two blocks from the New Jersey shoreline. Originally intended as a beach getaway, today the house functions as a second home for the 36-year-old from Philadelphia. When long weekends turn into weeklong shore visits, Callan doesn't worry about being disconnected from work. "It's just morphed into this," Callan says. "In my world, it's real easy. I can work on my cell phone if need be."

Callan is among a growing number of owners of vacation homes who are using their weekend retreats interchangeably with their first homes. Our increasing ability to telecommute has transformed many of these dwellings from weekend or summer getaways to true year-round second homes - alternate locations where people live for weeks or months. At a time when most sectors are suffering economic losses, the continued growth in second-home sales stands out as a welcome refuge. Over the past 20 years, the number of second homes in the United States has more than doubled, to 3.6 million in 2000 from 1.7 million in 1980, according to Census 2000. Overall, second homes represented 3.09 percent of all housing units in 2000, compared with 1.87 percent in 1980. But it's not just the number of second homes that has increased - the median value of these homes is also on the rise, to $127,800 in 1999, up from $115,000 in 1995, according to the Washington, D.C.-based National Association of Realtors (NAR).

Driven by rising affluence and helped by low mortgage rates and recent tax laws, the second-home market mushroomed in the 1990s, along with the economy, and continues to thrive today. Baby Boomers - ages 38 to 56, especially those nearing retirement - make up the lion's share of second-home owners today. But Gen Xers like Callan have also been crowding into this market. Rural lakes and seashores within a two-and-a-half hour drive from cities are still the most popular attractions in the market, according to an analysis of Census 2000 data by East Brunswick, N.J.-based GeoLytics. And while prices continue to spike for the most desirable second addresses in exclusive resort towns such as Vail, Colo., or the Hamptons on Long Island, middle-class buyers are picking up less expensive properties and becoming a potent new market force in once-isolated areas such as the Finger Lakes in upstate New York or remote sections of New Hampshire.

The Second-Home Generation

The number of single-family second homes sold in 1999 rose to 377,000 - up 9.3 percent from 1997 and up a whopping 27.4 percent from 1995, reports the NAR. New numbers aren't expected until later this year, but anecdotal evidence supports a belief among real estate agents and housing analysts that this market hasn't quit growing. In fact, the NAR estimates that second-home sales in 2000 shot up to 415,000, which would account for 7 percent of the entire home market.

The majority of second-home owners - 79 percent - are married couples, followed by single men (8 percent), single women (8 percent) and unmarried couples (5 percent), according to the NAR. And though traditionally only the wealthy could afford a second residence, today working professionals have been joining the mix. In fact, the median income of a second-home buyer is $68,800, and the median age is 43, according to the NAR's 1999 biennial survey. That's significantly younger than the average age of all current second-home owners, which is 52, according to the Census Bureau. The NAR estimates that buyers ranging in age from 35 to 60, which includes Boomers, will drive the construction of 100,000 to 150,000 new second homes each year through 2010. And while Michael Carliner, an economist with the Washington, D.C.-based National Association of Homebuilders, says that up-to-the-minute, hard data is often difficult to come by, he points to 1990 census figures, which revealed that every state has at least one county in which 20 percent or more of the residences are second homes. "These second homes often aren't very far from primary residences," says Carliner, who expects Census 2000 numbers to reflect the same pattern.

The people buying second homes just beyond the fringe of American cities are more likely to have families, says Patricia Breman, a senior consultant with the VALS (values and lifestyles) program, the part of the Princeton, N.J.-based SRI Consulting Business Intelligence that examines the psychological factors that motivate consumers. "These second-home buyers are also very time-compressed," Breman says. A nearby second house allows homeowners "to steal a weekend or a long weekend for a little family getaway," she adds.

But other segments of the U.S. population - about 10 percent - are looking for adventure when they take off for a weekend, a week or a month, says Breman. Affluent, with small families and a desire for excitement, this second group tends to purchase a second home in a distant locale. "These people require more variety and stimulation and are more apt to take a flight," Breman says. For both groups, second homes also make a sensible addition to investment portfolios.