Crunch turns vacation homes to rentals
If there’s a bright side to the national housing crisis, it’s in the luxury vacation rental industry. South Florida, a center of second homes and a locus of leisurely living, has suffered as badly — if not worse — than any market in the country.
Indeed, many of the hardest hit real estate markets are showing the biggest uptick in vacation property listings intended as second homes, but which are now for rent, often as a means of economic survival. Despite the challenging economy, nearly two-thirds of vacation rental homeowners reported summer bookings were the same or higher than last year, according to a second-quarter report by HomeAway, a national vacation rental company headquartered in Austin, Texas.
“There are a lot of people who extended themselves to buy vacation properties [who] never intended to rent them out, and now they find themselves in a position where renting makes financial sense,” said Brian Sharples, CEO of HomeAway.
Nationwide, about 54 percent of owners need to rent out their vacation home more frequently than in the past to cover home maintenance costs. What’s more, approximately 15 percent of vacation rental owners nationwide have also rented out their primary residence to travelers, the report says.
Sharples said this trend becomes more obvious — and expensive — during special events such as the Super Bowl or the presidential inauguration earlier this year. He points to a substantial spike in the number of vacation rental inquiries on HomeAway.com for the greater Washington, D.C. area prior to President Barack Obama’s inauguration.
“It’s clear that travelers are seeing the value that vacation rental homes and condos provide over hotels as they continue to travel in this economy,” said Sharples. “Vacation rentals have long been attractive to families and groups. However, the economy has also created flexibility in the marketplace where shorter stays and big city destinations like Miami and New York are becoming increasingly popular as well.”
HomeAway reports a 36 percent year-over-year increase in the number of vacation homes rented in Miami in the second quarter even as home sales decline more than 32 percent.
Diane Schaffer, principal of Florida Luxury Rentals and Sales in Fort Lauderdale, is seeing the trend play out on the ground in South Florida. She reported a growing number of luxury home owners calling her with a request to put their primary homes on the vacation rental market for short- and long-term rentals. International travelers are the typical renters, she said.
“Luxury properties are definitely renting short-term,” Schaffer said. “Most people want features such as pools or oceanfront homes. There is a large supply, so travelers are very choosy about the luxury vacation homes they rent. Long-term rentals are more difficult to broker.”
With affluent snowbirds making their way to South Florida from various parts of the world in the months ahead, Schaffer expects the luxury vacation home rental business to keep booming. She also expects more owners to rent out their multimillion-dollar homes on the vacation market in the months ahead.
“People are struggling to pay their mortgage. They have two options: sell or rent,” Schaffer said. “Unfortunately, they can’t sell quickly in these market conditions so their only option is to rent — and that’s what they are doing.”