Second-home sales plummeted in 2007

Second-home sales nationally took a big hit last year as speculators disappeared from the market in the face of tightening credit, the National Association of Realtors reported yesterday.

Vacation-home sales dropped 30.6 percent in 2007, to 740,000 from a record 1.07 million in 2006, while sales of investment properties fell 18.1 percent, to 1.35 million last year from 1.65 million in 2006.

At the same time, sales of primary residences were off 10 percent, to 4.34 million in 2007 from 4.82 million in 2006, the NAR reported.

NAR chief economist Lawrence Yun said the decline had been expected because "second homes are discretionary purchases, and there is a natural tendency to pull back from big-ticket items in periods of uncertainty."

Credit tightening, especially during 2007, made lots of buyers take a wait-and-see attitude, he said.

Investors "are being wrung out of the market," said Mark Zandi, chief economist of Moody's Economy.com in West Chester.

"The housing market has gone from boom to bust as the investor frenzy has flamed out," he said. "Both flippers and long-term investors have fled the market. The long-term investors will eventually come back, but the flippers won't be back in our lifetime."

Lily Khalif of Philadelphia is a long-term investor, and she continued to pick up Center City properties during the boom.

"Prices never went up so much to deter us," she said.

This is, however, a much better time for long-term investors.

"I wish we had access to more capital to buy, especially for new construction," Khalif said. "Builders never have been as willing to negotiate price as they are now."

There are no NAR sales numbers available for the Jersey Shore, but there are people who waited several years for prices to stabilize to pick up an affordable vacation house.

"In Ocean City, where there is a lot of unsold inventory, there are plenty of bargains, with prices maybe 20 to 30 percent lower," said Jerome DiPentino, owner of Premier Properties in Longport. "Where inventory is low - Margate and Longport - prices are down maybe 5 to 8 percent."

Alex and Beth Cerrato of Haddonfield waited five years for prices in Ocean City to drop before buying a condo last fall.

"We'd researched the market ourselves, paid down our primary-house mortgage, figured out exactly what we could afford, got a mortgage commitment from a lender to make negotiating go more quickly," Alex said.

The result: They found a property that was selling $125,000 below what others were going for in the neighborhood. And by negotiating directly with the seller, they were able to get a house already listed at a bargain $475,000 for $400,000.

"A real estate agent had complained that it was a little smaller than the others, but it's five houses from the beach, and the owner was a contractor who filled it with top-of-the-line everything, including furniture," he said.

"We settled in two weeks," Cerrato said.

In turn, the seller, who owned the house outright, put the money down on a house on the beach listed for $1.2 million.

"I think he got it for $1 million," Cerrato said.


Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.