Listing Courtesy of LINDA VISTA REAL ESTATE
In Rehoboth Beach real estate, there are happy words (“sold!”) and there are troubling words (“default”). Because of the associations they conjure up, some phrases just automatically make us happier. Two of the leaders in the positive category are the magical words, ‘vacation home.’ All by themselves, they can trigger a smile. Why not? “Home” is comforting; “vacation” is fun. Put them together in “vacation home” and you’ve got a double positive. It’s a real estate equivalent of Jimmy Buffett’s Cheeseburger in Paradise.
As the economy recovers, some American families are doing more than just smiling at the idea. The Wall Street Journal says that vacation home sales jumped more than 50% in 2014—up from 717,000 the year before. Quicken Loans reports a jump “in both the number and dollar volume of second home mortgage applications.”
To a Rehoboth Beach homeowner with sufficient wherewithal, there are some practical, real life incentives for moving the idea from daydream to the ‘to do’ list. The primary motivation is what comes first to mind. Just as a vacation is a welcome respite from the day-to-day, a vacation home needs to qualify as a destination that is pleasurable in itself. Where that could be differs for everyone, but whether it be the beach, desert, mountain, lake, cultural metropolis or outdoor sporting mecca, any Rehoboth Beach homeowner’s vacation home should be a haven inherently suited to relieving the stress of the workaday world. Although it would seem to be properly classified as a pure luxury expense, vacation homes can be more financially sensible than that.
The Kiplinger web site has a number of observations for vacation home buyers. It finds that some mortgage interest rates on second homes have lowered to first-home rates. Another alternative is the “favorite source” for all-cash purchases: a home equity line of credit. According to Kiplinger, “Mortgage interest on a second home is deductible on as much a $1 million in principal for both homes combined.” If lenders calculate eligibility via the Fannie Mae and Freddie Mac guidelines, a borrower’s total debt payments should not exceed 36% of gross income…but if the second home is to be rented, that income can be part of the calculation.
Which brings up some other possibilities. A vacation home can not only cut down on vacation expenses (hotel and restaurant prices are rising, after all); if rented out some of the time, it can contribute offsets to its cost. To take advantage of IRS rules regarding personal versus rental classification, you should consult a tax expert. Since a quarter of vacation homes are rented out at least some of the year, it’s a tactic that deserves investigation.
Perhaps the advantage that’s talked about most for second home buyers is the contribution it can make toward retirement. If a retiree ultimately converts a vacation home to principal residence, profits from the former home can make a handsome contribution to the retirement nest egg. And if by retirement time that vacation home has been paid for in whole, it can make for an even more pleasing financial picture.
For an Rehoboth Beach resident with sufficient resources, purchasing a vacation home can be a practical as well as emotionally sustaining venture. If it sounds like an idea worth investigating further, talk it over with your financial advisor—and I’ll be standing by to help with any and all real estate considerations! Call/Text me Russell Stucki at (302) 228-7871, email me at firstname.lastname@example.org, visit more listings at www.beachrealestatemarket.com.
If you’ve ever had the kind of neighbor who is apt to borrow something (like your hedge trimmer), only to later complain about how it performed, you know how much patience it takes to hold your tongue. The Mortgage Bankers Association would be justified if they felt that way about me: I read their website, and sometimes quote it in posts about current Sussex County mortgage rates—but it sure makes for dull reading!
Anyway, with apologies to their (undoubtedly hard-working) writing staff, last week’s blog about national mortgage rates was as numbers-heavy as usual, yet still held a contradiction…but one that actually makes perfect sense. It also flags what could be seen as a bellwether that Sussex County home buyers and sellers would be hard-pressed to ignore.
The apparent contradiction was that mortgage rates were on the increase: national mortgage rates for 30-year fixed loans rose to 4.17%, which is the highest they’ve been since November. This is for conforming loans; the jumbos (greater than $417,000) went north as well, up to 4.15%.
As everyone knows, low mortgage interest rates are terrific for our Sussex County residential home sales. The low monthly payments that they create make homeownership more affordable for a greater number of buyers. So when rates increase and monthly payments go up, it should create a drag on the market. The apparent contradiction in the MBA release was that the increase in rates was accompanied by an increase in mortgage applications. And it was a big one: up 8.4% from the week before.
Most commentators were united about the phenomenon, and it’s hard to disagree. In addition to the natural surge that comes with the season (spring and summer are always expected to be quite active), consumers are seeing the uptick in mortgage rates and suspecting that rates will head higher. That’s nudging them to action, causing them to jump in now, while rates are still attractive—especially compared with historical averages.
CNBC’s Diana Olick agreed that such sharp increases actually help the home-buying market. She quotes one lender’s take about the buyers: “They understand that ‘wait a minute, rates are at an all-time low, let’s react now, let’s react before they go higher.’”
It’s far from a certainty that rates will continue to take off. Lots of us remember last year, when almost all the experts predicted a rise, yet mortgage interest rates headed in the opposite direction…and stayed there! But you can hardly blame area buyers if they go with the national trend and decide that locking in today’s rates is a prudent move: it’s a bird in the hand.
If you have been thinking along the same lines, I hope you will give me a Call/Text me Russell Stucki at (302) 228-7871, email me at email@example.com, visit more listings at www.beachrealestatemarket.com.