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Push for Second Homes Transforms Once Remote Areas

Buyers' Plans for Retirement, Vacations Drive Market Boom

By Tim Whitmire

Associated Press
Saturday, August 13, 2005; Page F22

MARBLE, N.C. -- On a hillside at the remote western tip of North Carolina, real estate agent Joey Reid is showing off the next big thing in this area's booming market for vacation and retirement homes.

With 10-foot ceilings, stone fireplaces and screened decks with a mountain view, homes at Black Rock Falls are expected to fetch prices from $300,000 to $500,000. Owners will share access to a natural waterfall, adjoining trails and a clubhouse overlooking the falls.

Tom Meggers and Linda Hunt of Naples, Fla., are thinking of relocating permanently to Murphy, N.C., where they have vacationed for years. "We like the climate," Hunt says. (By Chuck Burton -- Associated Press)

Northern New England Leads the U.S. Boom In Second Homes for Vacations, Investments

By Ross Sneyd

STRATTON, Vt. -- David Tesher and his wife, Anita, had a couple of goals as they were shopping for a vacation home.

They wanted a place where they could relax with their young family and spend quality time together away from their busy lives in New York. And they also wanted a place that had a little more financial promise than the Internet stocks that proved such short-lived investments a few years ago.

Tesher, his wife and two young daughters found all of that four years ago in the pricey real estate developments that have been erected in recent years around the base of Stratton Mountain, four hours from their home on suburban Long Island.

Nowhere in the country is the trend of second-home ownership more profound than in the rural mountains of northern New England. Maine has the highest percentage of second homes in the country, followed by Vermont.

The region's attraction is driven by the millions in metropolitan Boston and New York who can easily escape to the mountains, leaving behind careers and concerns about terrorism. They find much more affordable real estate that they can buy more easily by using equity they've built up in their primary home in the past decade or so.

Like Tesher, millions of people had bad experiences with the Internet stock bubble. They began buying real estate as a safer investment, pushing second-home ownership to unprecedented levels.

"The returns, because real estate prices have been going up so rapidly, are attractive," said economist Thomas Kavet, who follows real estate trends as an adviser to the state Legislature, among other clients.

The huge investments in the northern states has been a mixed blessing. Although people in the states appreciate the jobs created by multimillion-dollar developments like those ringing Stratton, the condominiums and other homes drive up the cost of all real estate. People who live and work in a place like Stowe in northern Vermont, for example, have found it increasingly difficult to buy a home.

The fear for developers is that speculative buying can lead to the kind of real estate bubble that economists are warning is building. Such bubbles can pop, leading to foreclosures or vacant housing.

Given there has been such price appreciation over the past few years -- as much as 18 percent some quarters in Vermont -- Vermont Economy Newsletter Publisher Arthur G. Woolf believes that most of those second-home buyers would be able to withstand even a 20 percent downturn with little or no harm.

"If it's only vacation homes, then those people take a capital loss. The houses are still there," he said.

Tesher of Manhasset, N.Y., said he plans to hang on to his two condos in Stratton, so he doesn't believe he's contributing to a bubble or a bust. But he does worry about buyers who have relied on interest-only loans, variable rate mortgages and other vulnerable financing schemes. They could precipitate a bust and he doesn't really want his investment to devalue, even if it's only on paper.

"For me, I feel comfortable now even if the market corrects 20 percent or more," he said. "I'm still at what I invested."

"It's a baby boomer's playground," said Reid as he walked a visitor through the first house in the development, currently under construction.

Black Rock Falls will be the first upscale vacation development in this town where modest vacation homes now sell for $160,000 to $250,000, a four hour-plus drive from Charlotte, N.C.

Across the country, previously unheralded communities are being transformed by a boom in second-home purchases fueled by demographics, cheap loans and a real-estate market some believe is in a bubble.

Atlantans priced out of the hot northern Georgia mountains and Floridians disillusioned by that state's rampant growth are behind the boom in Marble and nearby Murphy, N.C.

In Oregon, low interest rates and high equity in the San Francisco Bay area have drawn many retirees and second homeowners to white-hot Ashland, a perennial on various best-places-to-live lists.

And in scenic Paonia, Colo., vacation homes are attracting buyers with prices that are half those of comparable dwellings in Snowmass or Aspen, where a one-bedroom condo was listed for $370,000.

"We say the billionaires pushed the millionaires out of Aspen and they ended up in Carbondale," former mayor and Paonia native Ron Rowell said, referring to another trendy Colorado second-home destination. "Now they've been driven over here."

Nationally, a record 2.82 million second homes sold in 2004 -- 1.8 million as investments and just over 1 million as vacation homes -- a 16.3 percent increase, according to the National Association of Realtors. In all, 36 percent of all homes purchased in 2004 were either for investment or vacation.

Three factors are driving the surge, said Jeff Lyons, general manager for the Charlotte-based Web site http://www.realestate.com/ : aging, wealthy baby boomers approaching retirement age; heightened interest in real estate investing; and continued low interest rates.

Those historically low rates, combined with expanding wealth among the upper ranks of American workers -- itself often a result of home equity built up due to the hot real estate market -- have made second homes that were once a luxury a reality for more people. And baby boomers are trading the home equity built up in high-priced cities for retirement in cheaper towns.

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Push for Second Homes Transforms Once Remote Areas

Buyers' Plans for Retirement, Vacations Drive Market Boom

Northern New England Leads the U.S. Boom In Second Homes for Vacations, Investments

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