Nation's Taste for Country Retreats Seen Heating Up Vacation Markets

Loans for recreational homes may give mortgage lenders that service beach and lakefront communities a reason to celebrate in upcoming years.

The number of households that purchase vacation homes is expected to almost double from 1990 to 2005, according to a study conducted by Ragatz Associates, of Eugene, Ore.

More than a third of American households today say they have a 50% chance or better of buying recreational property in the coming decade, according to the American Recreational Property Survey.

This is compared with the 15.5% of households with the same expectations in 1990.

Real estate agents in prime vacation spots - waterfronts and mountains - are already seeing prices rise and demand heat up, reports Knutson Mortgage Corp., Minneapolis.

"We've seen the demand in this area go way up, and the inventory is way down," Gene Goedker of Goedker Realty, Brainerd, Minn., told Knutson. Goedker is in Minnesota's North Woods.

"The prices for lakeshore property are going out of sight. People are paying more than the asking price, and from an appraising perspective, even the county is having a hard time keeping up with the values," Mr. Goedker added.

Demand for vacation homes should continue to grow as baby boomers age and interest rates remain low. Additionally, people are retiring at earlier ages, reported Ray Sims, president and chief operating officer of Knutson.

The company is offering several float-down programs, which allow homebuyers to lock in a fixed interest rate, with a provision to obtain a lower rate if interest drops in the last seven days of the lock-in period.

Even the economically hard-hit Northeast is seeing some relief in the form of vacation home sales, Knutson reports.

Empty-nesters are looking for homes away from the city, but not far from conveniences, according to Bob Woods, director of operations for Harbor Realtors in Kittery, Me. "There's scarcity and demand in the market, but also a large market realm of potential buyers, so sales will continue to grow methodically," he said.

Aging boomers are looking predominantly to waterfront and mountaintop locations as sites for their second homes, the study also found. Developed communities, built around a particular recreational theme, such as golfing or skiing, are proving least popular.

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