Prices have dropped in many places to where they were prior to 2005. Demand is pent up for both first and second homes, and inventory is beginning to fall off. For many builders, material costs have gone up so much that they can’t make a profit in this market – existing homes on the market provide too much competition.
It remains to be seen as to how the foreclosure scenario will play out over the next several months. If the government and banks do nothing, I’d expect home prices and vacation homes to depreciate a bit further. If they begin renegotiating these loans in terms of interest rate and loan extensions, then we could see a bounce off the bottom of the housing market that will begin a new round of modest appreciation in housing prices.
If you need to sell your vacation home, hold on for as long as you can. Rent it, cut more on your budget, or whatever is necessary to avoid selling at the bottom of the market. You’re close right now, and if you could hold on for a few years, it could make a huge difference, not only in the selling price, but in negotiating the sale, the time involved in selling your property, and buyer ability to secure a loan – yes, banks are denying many buyers right now. If you are selling now, make sure you get a very good escrow check with any offers, perhaps in the 10% range. This is the minimum most banks are accepting as a downpayment on a second home.
