Real estate broker Matey Veissi answers questions after a panel discussion on the vacation home market at the National Association of Real Estate Editors' Spring Journalism Conference in Houston, Wednesday, June 11, 2014. Staff photo / Harold Bubil; 6-11-2014.
HOUSTON — Nothing says luxury quite like a second or vacation home.
Especially if it is in a coveted resort area, such as Telluride, Colorado, where some rental accommodations go for $5,000 to $20,000 a night, or South Miami Beach.
Although it lags the residential market by 24 months, the luxury market is showing signs of health again, say speakers at the National Association of Real Estate Editors’ Spring Journalism Conference here.
Vacation housing is so much in demand that redevelopers are “rescuing” aging resorts for a new group of buyers, said Ben Jenkins of Land Advisors Resort Solutions.
“Developers are taking old properties and trying to turn them back on,” said Jenkins. “They are getting smarter and looking at ways to make communities more reasonable” with regard to rental rules and club membership fees, which can impede a community’s recovery.
Miami, which suffered from a glut of condos when the boom market went bust seven years ago, is building again in a big way, said boutique real estate broker Matey Veissi of Veissi & Associates.
“At one time, we had a six-year inventory of unsold condos,” she said. “Now we have 27,000 units coming online in the next year or two.” Many of them will sell in the vacation-home market
Critics of the new Miami condo boom fear a repeat of the bust by creating a glut of heavily financed units from which owners will walk away if the market crashes.
That, says Veissi, is unlikely for several reasons. Most developers are looking for 50 to 70 percent down payments in preconstruction, she said. “If someone walks away, you have their money; it is nonrefundable.”
Another bust-proofing element is the all-cash purchase.
“The credit market is very tough,” said Veissi. “Most buyers pay all cash” for their vacation condos.
More than 40 percent of Miami buyers are from foreign countries, she said, making it almost impossible for them to get an American mortgage. Some buyers may borrow the money from family or other sources and purchase without a secured mortgage.
“Financing is difficult, at best,” said Veissi, who sees buyers from Brazil and Venezuela, who like the night life of South Beach. English and Germans like the quieter, cleaner Gulf Coast markets.
Chinese developers, said Veissi, are investigating how Florida has catered to the senior market, “because there is a big senior population in China.”
Jenkins said his developer clients are looking for markets with “good fundamentals.” Location is No. 1.
“I don’t see a lot of speculative buying in any market,” Jenkins said. “Capital for that has dried up. The key word is ‘utility.’ People want to buy something they can use today — a two- to three-hour drive and use it every weekend as a second home, not just a vacation home.”
The “X factor” in the vacation and second-home market are Generations “X” and “Y,” the latter group also known as “the millennials.”
Gen Xers were born from 1966-1980, and the millennials from the 1980s to 2000. Accustomed to urban living, mass transit, night life and lots of student-loan debt, developers want to know how they may someday transition into the second-home scene.
“We have to get smart about what the Generation X’s and Y’s are going to want in a vacation home” when they are ready.
Meanwhile, back at Telluride, Natalie Binder of Telluride Rentals is still bragging about an epic snow year, which will bode well for demand next ski season.
“Rentals are up 10 percent over last summer,” Binder said.
Rents are increasing 5 to 10 percent this year, she said, adding that the “rich can negotiate more now” because they are flush with cash.
The big change is that as the market recovers from recession, owners are able to sell their $3 million vacation homes, and that makes rental management difficult.
“During the downturn, people couldn’t sell vacation homes, so they put them on the rental market,” she said. “Now our market has picked up, and the houses are selling. That means moving rental reservations for that property. We have to call renters and say, ‘This property has sold and we are moving you.’ How do you allow sales, yet keep everyone happy. It is a challenge.”
Another challenge is the competitive nature of the resort-management business, Binder said. Fraudulent listings are a side effect, as crooks steal photos and information and post fraudulent listings to collect deposits on properties to which they have no rights. The potential renter loses money, and it is bad PR for the resort.
