Four longtime friends from the Kansas City, Missouri, area don’t know it, but they are on the leading edge of a growing phenomenon in vacation homes. They are buying places collectively: first in Vail, Colorado, and then in Nashville. Now they are searching for a spot in the Tampa Bay area.
“We buy ‘together places,’” said David Vanlerberg, spokesperson for the four longtime construction industry buddies.
At one time, Vanlerberg owned a place in Florida all by himself, but rarely used it.
“I got sick of paying all that money and it was not being used,” he said.
He and his friends threw in together. They buy new condominiums – “they’re so easy to take care of” – with at least three bedrooms, and they don’t rent them to others.
With the four owners taking turns, “it seems as though someone’s always using [the condos],” Vanlerberg said. “That’s what so nice about them. They’re always being used.”
Group Buying on the Rise
Broker John Pfeiffer doesn’t see that many four-family groups like Vanlerberg’s buying places in the Colorado mountains. But he said there are a lot more families buying together than there used to be.
“Multiple buyers, like the guys from Missouri, are not as common,” said Pfeiffer, whose firm sold the group their latest mountain home. “Usually, it’s one or two high-income, high-net-worth families. Sometimes its multi-generational families, or Baby Boomers who are bequeathing their apartments or houses as their legacy.”
Groups like these want more square footage, the broker reports, usually for entertaining. Massive kitchen islands, sometimes 20 feet long with lots of seating, also are the order of the day. The more bedrooms, the better, and it’s really nice if each bedroom is a suite.
Group-buying is what gave birth to the timeshare business years ago. Under that concept, instead of spending beaucoup bucks on a place all by yourself, you can share in the cost with other like-minded buyers by purchasing a week or two’s usage.
Now, for the most part, the big timeshare developers like Hilton, Marriott and Diamond are selling points that can be converted for time at their properties. But the concept of shared ownership is the same. And after a run of bad publicity and flagging sales, the business is enjoying renewed vigor.
Timeshare sales increased in 2018 – the ninth straight year – rising nearly 7 percent to $10.2 billion, according to figures from the American Resort Development Association. The average price of a timeshare interval last year was just under $21,500.
ARDA counts 1,580 timeshare resorts with some 204,100 units. More than two-thirds of the units have two or more bedrooms and at least 1,180 square feet.
Timeshares Get More Use
Two other important facts about timeshares: According to ARDA, the annual maintenance fee paid by each owner is $1,000, an increase of just 2 percent from 2017. The average occupancy rate was 81 percent, whereas it is 66 percent for hotels.
That last point doesn’t square with a Lending Tree poll of people who have whole ownership of a vacation property. It found that almost half “feel guilty” about not using their properties as much as they anticipated.
Of course, families buy holiday homes with good intentions. They expect to make good use of them, and some hope to use them to generate income. But Lending Tree found that only one in four use their places more than five times a year, and 37 percent use them once a year or less.
While about half the respondents bought their homes to rent to others, 41 percent have never done so. A third rent year-round, meaning they never get to use their places at all.
Meanwhile, one section of the shared-ownership business, known as fractionals, isn’t doing so well. According to the latest report from resort-industry research firm Ragatz Associates, sales are stagnating. Last year’s sales dipped to $471 million, the lowest in 15 years.
Fractionals come in all shapes and sizes, and include deeded shares ranging from two weeks to three months of annual use. They also include private residence clubs and destination clubs, which typically sell 30-year memberships.
Ragatz found that of the 316 fractional properties in the United States, only 50 made sales last year. The rest are either old or sold out.
A few other vacation-homebuying trends worth noting:
- Vacation rental company Vacasa said many people are building portfolios of vacation properties. Its survey of 1,700 buyers actively searching the market found that more than half already have one holiday place, and one in four are looking to buy multiple places.
- Tiny homes are finding their way into the sector, said Brian Corbett of Inspirato, an outfit that manages luxury vacation homes. Corbett predicts landowners will temporarily place rentable tiny homes, tents or other accommodations on their properties to create a resort-like experience until they ultimately decide what to build. “It’s a creative way to test concepts on land, rather than letting it sit idle,” Corbett told Urban Land, a trade journal.
- When people think of vacation homes, they tend to think of ocean properties or mountain chalets. But don’t forget lake homes. “It’s not a small niche; sales could hit $40 billion this year,” reported Glenn Phillips of Lake Homes Realty, which has some 87,000 listings on or adjacent to a lake.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.