7 Reasons You Should Invest In a Vacation Home Now

Based on data from Realtor.com, 2.5% of new mortgages taken out for the year ending in May 2024 were for a second home. This rate didn’t change from the previous 12-month period, meaning the market for second homes has remained consistent despite higher mortgage rates forcing many potential home buyers to stay on the sidelines.

If you’re one of the people debating the idea of purchasing a vacation home or a second property, here’s a look at why right now could be the ideal time.

Also, check out some up-and-coming locations to buy.

“Buyer demand decreases significantly because — unless it’s a winter vacation home — at this point in the year, it could be a solid eight to 10 months until buyers would actually be able to use their new homes,” said Seamus Nally, CEO of TurboTenant. “So, if you’re looking to get the best deal, now is definitely the time to start shopping around.”

With summer ending, many people aren’t thinking about traditional vacation homes. However, this could be the ideal time to look into a second home or vacation property to prepare for next year’s season.

Investing in your vacation home during the off-season will set you up for 2025 and beyond.

Nally mentioned that the time of the year can significantly impact the price if you’re considering buying a vacation home.

He said, “Generally, summer and spring are peak times for buying vacation homes, because that is when people want to start using them, so during those months, prices are often a bit higher. However, as we transition into fall and winter, prices should start to dip a bit.”

You can take advantage of lower prices this time of year and negotiate a lower price on that vacation home. You don’t want to wait until more buyers enter the market, because this would drive the prices up — especially if you’ve been thinking about making this investment for some time.

“You can generate passive income by renting your vacation home when you’re not using it,” said Chad Breeden, the owner and founder of Sentry Real Estate.

If you’re on the fence about a second home, you can run the calculations to see how much income you could bring in from short-term rentals. For example, investing in this vacation home during the fall months could bring in some significant income during the holidays.

Breeden noted that a vacation home builds equity over time and can diversify your investment portfolio. If you have the funds available to purchase a second home at the moment, you could treat this as an investment that you add to your portfolio so that you’re not investing in only one asset class.

Breeden also pointed out how owning a vacation home gives you a personal getaway and saves you money on future vacations. Instead of spending money on a family trip for the winter, you could allocate these funds toward a second home that feels like a retreat when you’re ready to get away from everyday life.

You can also purchase a vacation home for non-financial reasons, like having the option of a place where you can create memories with your family or a location where you can host guests who visit you.

“With more people working remotely, you can use your vacation home as a second office while enjoying a new environment,” said Breeden.

If your working location is flexible, you could escape to your vacation home for a change of scenery without having to take time off.

“The fall of 2024 could be a good time to buy a vacation home, because high interest rates have kept buyers on the sidelines for many months,” said Geordie Romer, a real estate broker at Windermere Real Estate. “When there are few buyers competing, buyers have the ability to negotiate prices and other terms, which may include repairs or having the seller pay brokerage fees.”

Romer mentioned that the Fed is likely to lower interest rates soon, a sentiment shared by many experts and analysts. While there are no guarantees that a possible rate cut announcement from the Fed in mid-September will lead to lower mortgage rates, it could be a step in the right direction.

While it’s difficult to predict what will happen to mortgage rates for the rest of 2024, when mortgage rates do start to come down, more buyers will enter the market. This increased buyer activity is a positive for sellers, but buyers could lose any negotiation advantages that they have. This could lead to home prices increasing again, and the supply of available vacation homes could decrease.

Romer concluded, “Many buyers have been waiting for interest rates to come down, but waiting for lower rates means competing with other buyers, which generally means higher prices and a smaller opportunity to negotiate with home sellers.”

If you’ve been thinking about investing in a vacation home, this may be the ideal time — it’s worth shopping around to see what your options are.