Time to Get a Getaway? • Despite a favorable market and plenty of options,
there are still reasons to have second thoughts on snagging a second home
written by john budris
PHOTO ILLUS TRATION/J POR TER; ORIGINAL PHO TOS/BIG S TOCK PHOTO
PLUMME TING PRICES. SWOLLEN INVEN- tory. Historically low interest rates. Motivated sellers. Foreclosures and short sales galore. It seems the perfect storm for buying a vacation home is making landfall. Yet, is it time to break out the checkbook and make an offer on that cottage in the dunes or chalet in the mountains?
Nicolas P. Retsinas, director emeritus of Harvard University’s Joint Center
for Housing Studies, weighs in with “a resounding maybe. Right now,
anyone thinking about making that second-home purchase should consider consumption first and foremost and investment second, if at all.”
No longer is it axiomatic that a second home is a safe place to park
your money. A vacation home meant for use and enjoyment, one for
which quality time with the family is the primary goal, is a good move
in this market, according to Retsinas.
“Investments, on the other hand, look for predictability, and it’s just
too volatile for that right now.” His sage advice: When it comes to snatching up that tempting vacation retreat, do it for love, not money.
Still, for the hard-core bargain hunter, it’s difficult not to see a buyer’s market flooded with so-called deals as a time to jump in with profit
in mind. There are a few things to consider, however. The accepted
rule of thumb is that housing costs — including mortgage, property
taxes, insurance, maintenance, and travel expenses — for primary residence and vacation home together should be no more than a third of
the family income. And to be safe, a year’s worth of the carrying costs
for those properties should be socked away in savings. While mortgages are being offered at historically low rates, the qualifications are
also tougher than ever, with stellar credit ratings, hefty down payments,
and strict income requirements in place.
That said, Massachusetts real estate agent Karen Hannigan of Point
B Realty — who sells properties on Cape Cod, as well as Nantucket
and Martha’s Vineyard, where her office is located in Edgartown —
still maintains that “with good and honest planning, it can be a great
time to buy for your own vacation needs.”
On the islands, where nearly all of the transactions are for vacation
property, buyers seem to be getting that message, according to Ruth
McGorty, publisher of the Real Estate Guide for Martha’s Vineyard.
“Sales activity on the Cape and Islands is the bellwether for the indus-
try, and the bell is beginning to ring with more volume.”
On Cape Cod, sales showed a steady increase in 2010, according
to The Warren Group, which tracks the regional real estate market,
and the median home price went from $276,250 in January 2009 to
$334,000 in October 2010.