Fishing for vacation homes
In down market, second-home properties luring buyers
Saugatuck, Mich., has been a magnet for Chicagoans for years because of its beaches, trendy boutiques, art galleries and yacht harbor. (John Handley/ Photo for the Chicago Tribune / September 2, 2011)
The inventory of vacation homes for sale has risen to historic highs in some sought-after areas in the Midwest. But the bottom of the market may be near as the supply of bargain properties dwindles.
Still, reduced prices have opened a window of opportunity for potential buyers to get into the second-home market, said Karen Strohl, a broker with Prudential Rubloff's Harbor Country office in southwest Michigan. "For the first time, they are able to afford a vacation property."
Strohl estimates that 90 percent of second-home buyers in Harbor Country are from the Chicago area.
"The selling season for vacation homes is in September and October," said Strohl. "That's when sellers drop prices."
Of course, second homes are a luxury item for those with disposable assets. But money isn't the only factor when it comes to purchasing a place to kick back and relax.
"Buying a vacation home is more of an emotional decision than an investment decision," said Tom Drake, president of The Drake Group, a homebuilder in Glenview. "Today's buyers aren't looking to flip the property in a year or two."
Strohl has noticed some baby boomers are renovating their vacation homes for year-round living. "They used to be just summer places," she said.
Drake has built vacation homes in Harbor Country, the 15 miles along Lake Michigan in Michiana, Grand Beach, New Buffalo, Union Pier, Lakeside, Harbert and Sawyer.
Besides Michigan's western shore, other popular vacation home spots for Chicagoans include Wisconsin and the northwest corner of Illinois.
"Harbor Country is a total mental and physical beach for me," said Sharon Ellingsen, who with her husband, Rick, bought a two-bedroom house in Harbert last year.
Although their permanent home is in Southern California, a vacation destination in itself, the Ellingsens were attracted to southwest Michigan because Sharon Ellingsen's brother lives in Lakeside, and she's a Midwest native who loves the dramatic change of seasons.
"We will use the Michigan home about eight weeks a year in all four seasons," she said. "By California standards, it was a bargain. The wooded lot creates the illusion of seclusion. My soul is at peace there."
Strohl noted that houses in Harbor Country that used to be $450,000 have dropped to $300,000.
"Those near the beach range from $250,000 to $700,000, while the 40 lakefront houses now on the market range from $1.3 million to $8.6 million," she said. "Some of these lakefront properties have already dropped in price by as much as $2 million."
Sales of vacation homes fared better last year than sales of primary residences, according to HomeAway.com, a leader in online vacation rentals.
Research by HomeAway, as part of the National Association of Realtors' 2011 Investment and Vacation Home Buyers Survey, showed that 38 percent of buyers purchased vacation homes last year because of lower prices.
Nationally, the median price of vacation homes was $150,000 in 2010, down 11.2 percent from $169,000 in 2009, according to the survey. The main reasons for buying included the desire for a family retreat, the potential for price appreciation and low mortgage rates.
The typical buyer of a vacation home in 2010 was 49 years old, had a median household income of $99,500 and purchased a property that was a median distance of 375 miles from his or her primary residence.