Sales of vacation homes fall during recession
— -- Since Suzanne Wegerland put her vacation home in Costa Rica up for sale last summer, she has had plenty of visitors.
Such as the giant red and green iguanas that saunter across the patio, or the pairs of yellow-breasted birds that dip their beaks in her endless pool overlooking the Pacific Ocean.
But so far, no buyers. While she has dropped her price on the property, with its rambling five bedrooms and nearby rain forest, from $2.35 million to $1.5 million, she is experiencing firsthand just how dismal the market has become for vacation homes. She has enough money to pay her interest-only mortgage of $3,800 through July, but after that, there are no funds left.
"It's such a beautiful place. You can sit on the patio and watch the birds, and to the left is the rain forest," says Wegerland, 52, of Houston, who works in the oil and gas insurance industry. She decided to sell the property because of unforeseen financial problems, such as medical expenses. "We're about to lose it to the bank."
Spring has arrived, but the sale of vacation properties is stuck in hibernation as the recession takes a toll on demand for second homes. That's leaving vacation home sellers with properties that won't sell, forcing some to rent out the homes and others to lose them to foreclosure.
Sales and prices down
Vacation home sales dropped 30.8% to 512,000 last year from 740,000 in 2007, according to a March report by the National Association of Realtors (NAR).
Prices have also tumbled. The median price of a vacation home was $150,000 in 2008, down 23.1% from 2007.
The drop-off is caused by several factors.
Home buyers have less discretionary income, in part because many owe more on their homes than they're worth, meaning they can no longer pull out equity lines of credit. The rise in unemployment has more homeowners leery of taking on another major financial investment. And tougher lending standards are making it more difficult to buy a vacation getaway.
Investors' shrunken stock portfolios also have reduced their resources to buy second homes, says Lawrence Yun, chief economist at NAR.
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