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Demand For Second Homes Keeps Growing
by Tom Larson
Despite the struggling economy and tragedies of 9/11, the demand for second homes has continued to rise. The median price of a second home rose to $162,000 in 2001, up nearly 27 percent from 1999. Over the same period, the median price of an existing home rose just 11 percent. According to NAR, 359,000 residences were bought last year as second homes, the second-highest volume since it began studying the market in 1989. Second homes accounted for about 6 percent of new and existing home sales last year. Analysts expect the second-home market to keep growing for several reasons:
- Baby boomers, aged 37 to 56, are in the peak earning years, many are inheriting wealth from their parents, and older boomers are looking ahead to retirement.
- Second homes are perceived to be good investments. Many people have seen their first home's value rise enough to give them the seed capital for investment in a second home. Others are choosing to "double down," selling one home and then buying two. And because the tax code allows a married couple to take up to $500,000 in profit tax-free from the sale of a primary residence, a second home is a tax advantaged investment.
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Governor's Local/ State Government Task Force Gets Down to Business
by Tom Larson
Governor McCallum's Task Force on State and Local Government recently held its first meeting in Madison and didn't waste any time getting down to business. Each member of the commission, which is made up of sixteen representatives from state and local government and the private sector, spoke passionately about the need for change in how government operates in this state, both at the local and state levels. The commission members were also clear in stating that it wanted its recommendations to actually be implemented, rather than sitting in a report collecting dust on a shelf.
The real estate industry is fortunate to be represented on the commission by Mike Mooney, with MLG Commercial, who has served on a number of commissions over the years.
The commission is charged with creating recommendations to strengthen the partnership between state and local governments in providing services to the public. In doing so, the commission has some broad objectives that could take them into a variety of issues that impact the real estate industry. Some of these objectives include:
- To review government organization, including the size and number of governments;
- To review efficiency and consolidation of government services;
- To review land use, boundaries and annexation;
- To review finances and taxations of state and local governments;
- To review state mandates that are barriers to consolidation; and
- To identify financial incentives for local governments to consolidate services, where possible.
The WRA will be monitoring the activities of the commission very closely. If you have any questions or would like additional information on the commission, please
email Tom Larson or call at (608) 240-8254.
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Personal Income Keeps Pace With Housing Costs
According to a new study by David Whyss, chief economist for Standard & Poor's, household incomes have kept pace with the soaring prices of new and existing homes. In 1982-83, the average new home cost three times the average household's annual disposable income, while today's average new home is about 2.6 times an average household's annual disposable income. Housing was the least affordable in 1988-89, when new home prices were nearly 3.5 times average household disposable income. The same patterns can be seen with existing-home prices.
The report indicates that the rise in household income growth is attributable to the rise of multiple-earner households, not necessarily increased wages. Another factor keeping housing costs lower is low interest rates: mortgage costs today account for a smaller portion of household income than 10 years ago. The National Association of Home Builders says the monthly principal and interest costs of the median-priced resold home today are equal to 16 percent of household income, down from 20 percent ten years ago and 23 percent in 1988.
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