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Real Estate > Real Estate Investments
Beach condos, townhouses, cabins - boomers keep market for second, third homes booming
AMY BALDWIN, AP Business Writer. Associated Press. New York
Copyright Associated Press
NEW YORK (AP) After losing $700,000 on Wall Street, Steven Style has stopped buying stocks. But he's still investing - in real estate.
"It's solid," the 42-year-old New Yorker said.
A growing number of baby boomers _ those Americans born between 1946 and 1964 _ are buying second and third homes. In their peak earning years, boomers are looking to diversify their investment portfolios. Some want a place where they can take a break from their busy lives, while others are looking at property as an investment.
The stock market's decline has increased real estate's appeal for boomers. Because they had more money than many other people to invest on Wall Street, boomers' portfolios have been particularly hard hit.
"We are not giving up on the stock market, but we are not putting new money into it. We want to have real, hard assets," said Rob Gelphman, a marketing consultant in San Jose, Calif.
Gelphman, 44, and his wife Maria, 43, are looking to buy a second home in California, or possibly on New York's Long Island.
"The stock market stinks. We have lost a lot of value in our 401(k)s and IRAs. California real estate doubles every 10 years," he reasoned.
That's not to say the real estate sector doesn't have its own ups and downs. Property prices in many parts of the country might be at or near their peak, financial planners say. That means buyers must assess what they want out of a prospective property _ whether it is something they plan to keep for leisure or if they plan to sell it more quickly for a profit.
Second and third home buyers should do the same type of research they did when they bought their first homes, said William Howard, a financial planner in Memphis, Tenn.
"Even in a pricey market, you can still find good deals, if you buy in the right location. So, do a lot of research on the area. Document the real estate transactions through property records," Howard said.
In the past year, Style purchased his third property, an oceanfront vacation condo in Miami's South Beach neighborhood. He also owns two apartments on Manhattan's Upper West Side, one in which he lives and the other which he rents out to pay the mortgage.
"At this point, you really can't put your money in the market with all the volatility," said Style, who owns a public relations firm in New York. "Although real estate prices are high, if you shop around and find motivated sellers, you can find some decent deals."
The market for second and third homes is strong. The National Association of Realtors predicts that more than 1 million second homes and vacation condos will be built in the next 10 years to keep pace with boomer demand. The association doesn't specifically track third home purchases but says they also are on the rise.
"It has been said that third homes are going to become as common as second cars. We do hear of people who have a mountain cabin and a beach house," said Walter Molony, a spokesman for the association. "This is very much a middle class, middle aged baby boomer phenomena."
Indeed, the profile of second home buyers mirrors boomer demographics. The median age of second home buyers is 46 and the median income is $77,700, according to the Realtors.
Prices on second homes also reflect the trend. The median price tag on second homes last year was $127,800, having risen 27 percent in two years. Meanwhile, last year's median price on first homes was $147,800, up about 11 percent in two years.
Interest rates, which are at 40-year lows, have helped to fuel the market.
Less than a year after buying his Miami condo, Style refinanced it at 5.5 percent over 10 years, shaving four years of mortgage payments.
Jerry and Jody Emig recently split the purchase of a second home with Jody's mother. For all three, it's a longer-term investment as well as an opportunity to look after each other, since the property is next door to the townhouse in which the Emigs live in Dublin, Ohio.
"Although we don't know a lot about stocks or bonds, we feel very comfortable with real estate," said Jerry Emig, 42.
Jody Emig, 45, said, "We knew we were losing a ton of money in our mutual funds and thought we could use this as a forced savings plan. We feel it is a very safe investment."
Pregnant with her third child, she's also looking forward to having her mom right next door and said, "We will be right there for each other, which is kind of neat."
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
People: Emig, Jody
Dateline: NEW YORK
Text Word Count 780
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