Second Home Market is Getting Its Second Wind

SUSIE GHARIB: This July 4th, more Americans may be enjoying the holiday weekend in their vacation homes. Second homes have been a sweet spot in the housing market as professional baby boomers return to real estate as an investment. And as Diane Eastabrook reports, the second home market is recovering from one of its worst declines in decades.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Coleen Muldoon just closed on a new vacation retreat and is showing it off to her sister and friends. The Chicago area nurse paid $273,000 for this house in Fontana, Wisconsin. It is located just a couple of blocks from Lake Geneva, a popular Midwest playground that is home to waterfront mansions and modest cottages. Muldoon was skeptical about buying a vacation home, but low interest rates and lower property prices convinced her to buy.

COLEEN MULDOON, VACATION HOMEOWNER: The woman who had sold me this house was going to sell two years ago. She probably could have, you know, sold it for a lot higher. So the house was selling at a very reasonable rate. With the interest rate, it was just no reason not to.

EASTABROOK: At a time when sales of primary homes are struggling due to the expiration of tax credits, sales of vacation or second homes in many areas are improving. Last year they outpaced sales of primary residences and investment homes which owners mostly rent out. Lawrence Yun, chief economist for the National Association of Realtors says vacation homes are benefiting from three things: improvements in the stock market, better availability of jumbo mortgages and interest from foreign buyers.

LAWRENCE YUN, CHIEF ECON., NATIONAL ASSN. OF REALTORS: Particularly the emerging economies of China, Brazil, India where they are seeing a good value proposition in the U.S. vacation home, so we may begin to see some greater transactions along international clients.

EASTABROOK: Still, the second home market is rebounding from very low levels. The segment peaked in 2005 when roughly a million vacation homes were sold nationwide. Last year, about half as many sold. In Lake Geneva the market for second homes actually began to sputter about four years ago. Realtors say home prices had gotten way too high. There were a glut of properties on the market and pretty much everybody who wanted a second home by then had bought one. Rob Keefe thinks his real estate firm is very close to selling this waterfront home. It has been on the market for two years and is priced at just under $3.5 million. Keefe says vacation home sales in Lake Geneva are up about 25 percent this year. And a lot of the buyers are baby boomers.

ROB KEEFE, PRESIDENT, KEEFE & ASSOCIATES: This is the peak buying years for the baby boom generation. We have had four more years of baby boomers entering the market who in any other ordinary market would have purchased a second home already and for a variety of reasons have not.

EASTABROOK: While the vacation home market has been improving, experts caution it hasn't fully regained its sea legs. They say sales could stall if there are tax hikes or if the debt crisis in Europe spreads, threatening U.S. financial markets. But in the short run, real estate brokers think the sun will keep shining brightly on the vacation home market. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Fontana, Wisconsin.

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