2 Legs Up With a 2nd Home
Saturday, April 15, 2006
Film producer Randy Auerbach just bought a one-bedroom condo in the District that will serve as an East Coast bookend to her pink cottage near Beverly Hills. Babak Fouladi, a George Washington University alumnus, added a condo in Northwest to go with his flat in London. And Mark Goode, head of an insurance investment company, is planning to buy something in Georgetown but is not quite ready to give up his place on Miami Beach.
What's going on? Isn't investing in real estate passé, so 2005?
Auerbach and the rest aren't speculators angling to make a quick profit amid a tapering housing boom. They are part of a growing group of second-home owners in a real estate market teeming with house-rich consumers and affluent baby boomers -- and they plan to use the properties themselves as pied-à-terres .
A pied-à-terre, French for foot on the ground, is usually a smallish home-away-from-home, owned by someone who wants a city place to live in part time.
About 3.34 million non-primary residences were sold nationwide last year, accounting for 40 percent of all homes sold, according to a report released last week by the National Association of Realtors. That's up from 36 percent in 2004 and 33 percent in 2003.
Vacation homes, for use primarily by their owners, made up a third of those second-home purchases. Generally, pied-à-terres would be lumped into this category. The rest were investment properties acquired mostly to generate rental income or diversify portfolios.
The market for the latter, most economists agree, will cool drastically in 2006 as interest rates tick up and the double-digit gains in home values seen in the past five years come to an end. On the other hand, David Lereah, chief economist for the trade group, and others say sales of vacation homes will remain strong, and possibly cushion market downturns. Vacation home sales were up 17 percent in 2005 from the previous year, to a record 1.02 million properties, the report said. The median price -- half cost more and the rest less -- for vacation homes was $204,100. For investment properties, it was $183,500.
"The vacation home market has a very powerful demographic tailwind," said Mark Zandi, chief economist of Economy.com.
Washington, of course, is hardly the vacation-home destination for out-of-towners in search of high surf or powdery snow. Still, some real estate agents say, suburban sprawl and urban revitalization have made pied-à-terres an increasingly attractive option for workers with long commutes or those who spend part of their week in the nation's capital.
Such second homes range from multimillion-dollar penthouses for the diplomat-and-executive set to bare-bones crash pads for young doctors, lobbyists or politicians with irregular work hours or families in different time zones.
Auerbach, a Washington native who moved to California 28 years ago, decided to purchase her second home around the corner from her father's house in the District after he became ill last fall.
Relatives called from Washington with real estate leads. She followed up when she was in town, either to see family or for research and development work for films. And after two months, Auerbach found a one-bedroom condo in a brick building near American University.