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At The Money: Buying a Vacation Home with Jonathan Miller · Masters in Business

• 0:09
  Speaker 1: Have you thought about owning or buying a vacation property.
• 0:13
  Speaker 1: Would you like a place to take the family to
• 0:16
  Speaker 1: on a lake near the beach or up in the mountains.
• 0:20
  Speaker 1: I have, and I know a lot of our listeners
• 0:22
  Speaker 1: have also. Let's bring in Jonathan Miller, CEO and founder
• 0:27
  Speaker 1: of Miller Samuel, a highly rated data analytics and research
• 0:32
  Speaker 1: firm covering the housing market. He has written a number
• 0:37
  Speaker 1: of pieces on vacation homes, second property, luxury properties, and
• 0:42
  Speaker 1: what's happening in that market. So Jonathan, let's just talk
• 0:47
  Speaker 1: a little bit about what's going on in the second
• 0:51
  Speaker 1: home market, whether it's the luxury market or not. Tell
• 0:54
  Speaker 1: us a little bit about what's going on out there.
• 0:58
  Speaker 2: Well, you know, we had coming out of the pandemic,
• 1:01
  Speaker 2: we probably had the biggest second home purchase boom in
• 1:06
  Speaker 2: history as people were coming, you know, sort of re
• 1:10
  Speaker 2: engaging with the outdoors again after the pandemic. And then
• 1:14
  Speaker 2: in the last couple of years we've actually seen a
• 1:17
  Speaker 2: big drop off in second home purchases. Now it's I
• 1:23
  Speaker 2: would describe it as more normalized, where it's more consistent
• 1:27
  Speaker 2: with seven or eight years ago before the pandemic, and
• 1:30
  Speaker 2: comparisons against the last few years are probably unfair to
• 1:35
  Speaker 2: the market.
• 1:36
  Speaker 1: So what's going on then, with the supply of homes
• 1:40
  Speaker 1: for sale? Obviously twenty twenty one, twenty two, a lot
• 1:43
  Speaker 1: of supply got sucked up. As a percentage of average
• 1:47
  Speaker 1: home numbers for sale, that number seems to have plummeted.
• 1:51
  Speaker 1: Has that normalized?
• 1:52
  Speaker 2: Yet? It depends on location. The way I think of
• 1:57
  Speaker 2: it is, we all are seeing a big uptick in supply,
• 2:04
  Speaker 2: but it depends on where the uptick began. You know,
• 2:07
  Speaker 2: did it become begin at a record load number and
• 2:11
  Speaker 2: now it's you know, we have some markets, a lot
• 2:14
  Speaker 2: of markets that are still behind pre pandemic inventory levels,
• 2:19
  Speaker 2: but we have a growing number of markets that are
• 2:23
  Speaker 2: sort of catching up or exceeding. But it is very
• 2:26
  Speaker 2: location specific.
• 2:28
  Speaker 1: The one let thing, Yes, let me take a few guesses.
• 2:30
  Speaker 1: I'm going to guess that we're seeing a big uptick
• 2:34
  Speaker 1: in supply in southern Florida and not as much supply.
• 2:38
  Speaker 1: And let's say the Hampton's or Jersey Shore off of
• 2:42
  Speaker 1: New York, or Newport or any of the vacation destinations
• 2:46
  Speaker 1: off of Boston. That's just my instinct. I'm curious what
• 2:49
  Speaker 1: your data shows.
• 2:51
  Speaker 2: It shows exactly that, you know. And another way to
• 2:55
  Speaker 2: really look at this simplistically is I think of Sunbown
• 3:00
  Speaker 2: versus everybody else. A sunbelt. You know, it's new product
• 3:06
  Speaker 2: can be built faster. You know, the whole moving away,
• 3:12
  Speaker 2: you know, to something cheaper. You know, a cheaper housing market,
• 3:16
  Speaker 2: which tends to be to the south was sort of overdone,
• 3:21
  Speaker 2: and now there's a big difference. Even within South Florida.
• 3:27
  Speaker 2: You look at Miami Dade is really seeing a lot
• 3:31
  Speaker 2: of supply come in significant about fifty percent over the
• 3:35
  Speaker 2: last year up. But then two counties to the north,
• 3:40
  Speaker 2: go Broward and then go Palm Beach County. Palm Beach
• 3:43
  Speaker 2: County is seeing declining inventory. So I don't think there's
• 3:48
  Speaker 2: a correlation with the further south you go, the more
• 3:53
  Speaker 2: inventory is rising. But that seems to be what's actually
• 3:57
  Speaker 2: happening in Florida.
• 3:58
  Speaker 1: Palm Beach kind of reminds me of East Hampton or
• 4:01
  Speaker 1: seg Harbor or something like that. So it's more you know,
• 4:04
  Speaker 1: East end of Long Island. Like, is it fair to
• 4:07
  Speaker 1: say that a lot of parts of places like South
• 4:10
  Speaker 1: Florida just to become victims of their own success. There
• 4:14
  Speaker 1: was such an exodus from California to Texas, from New York,
• 4:19
  Speaker 1: New Jersey, Connecticut to Florida, that it just seemed to
• 4:23
  Speaker 1: overwhelm the infrastructure and the supply. Fair statement, that's a
• 4:28
  Speaker 1: very fair statement.
• 4:29
  Speaker 2: And then throwing hurricanes on the Gulf side. The Gulf
• 4:35
  Speaker 2: side with you know, has has seen a much faster
• 4:39
  Speaker 2: rise in supply than the ocean side of Florida. And
• 4:45
  Speaker 2: I wonder too if that's part of you know, Canadians
• 4:48
  Speaker 2: tend to gravitate towards the Gulf side, and you know,
• 4:51
  Speaker 2: with the trade war that we're having right now, maybe
• 4:54
  Speaker 2: that's playing into it as well.
• 4:56
  Speaker 1: So we were looking in of all times, January twenty
• 5:00
  Speaker 1: twenty on the Gulf side in places like Saint Petersburg
• 5:04
  Speaker 1: for a winter home, and then the pandemic shut everything.
• 5:08
  Speaker 1: And when everything reopened, I wasn't as surprised about the
• 5:12
  Speaker 1: big increase in home prices as I was the giant
• 5:18
  Speaker 1: increase in things like insurance taxes, HOA fees. It got
• 5:23
  Speaker 1: to the point, wait, if I'm going to spend sixty
• 5:27
  Speaker 1: or eighty or one hundred thousand dollars a year on
• 5:30
  Speaker 1: everything around the house, not actually buying the house, Hey,
• 5:33
  Speaker 1: that pays for a lot of nice vacations. Maybe I
• 5:35
  Speaker 1: don't need to own a place in Florida. I could
• 5:38
  Speaker 1: just visit how significant is the cost structure change in
• 5:44
  Speaker 1: southern Florida? What's going on there? And where else are
• 5:48
  Speaker 1: we seeing that sort of spike in home ownership costs?
• 5:53
  Speaker 2: Right? So, you know when in the old days, when
• 5:57
  Speaker 2: you bought a house and you were worried about the
• 5:59
  Speaker 2: interest rate and the price of the house, uh, the
• 6:02
  Speaker 2: the costs of home ownership. Beyond that, we're sort of
• 6:07
  Speaker 2: a rounding area. You weren't thinking about the cost of insurance,
• 6:11
  Speaker 2: real estate taxes. And what we've been seeing in the
• 6:15
  Speaker 2: last several years is a big jump in not not
• 6:20
  Speaker 2: just the cost, but actually getting coverage in insurance. One thing,
• 6:29
  Speaker 2: you know, when we think about other parts of the
• 6:30
  Speaker 2: country that are sort of struggling, I would I would
• 6:35
  Speaker 2: characterize this as more of a national condition. Now. California
• 6:40
  Speaker 2: as wildfires, the Midwest is tornadoes, and the southeast and
• 6:48
  Speaker 2: eastern seaboard is an inland too is flooding. So there
• 6:54
  Speaker 2: just seems to be this sort of steady rising tide,
• 6:58
  Speaker 2: no pun intended, but of it. And actually the one
• 7:04
  Speaker 2: thing that you know, in all my research about this
• 7:07
  Speaker 2: over the last couple of years, the most expensive uh
• 7:12
  Speaker 2: uh insurance cost relative to home prices is the Midwest.
• 7:20
  Speaker 2: It's not Florida, it's not uh you know, wildfows in California,
• 7:25
  Speaker 2: because housing is so much less expensive in the Midwest,
• 7:29
  Speaker 2: but it's a bigger chunk, it's a bigger, bigger liability
• 7:33
  Speaker 2: or so.
• 7:34
  Speaker 1: We were just in Chicago a week or two ago,
• 7:37
  Speaker 1: and what was so interesting. So I'm in Chicago over
• 7:40
  Speaker 1: year for Thanksgiving, for forever. I always find the Midwest
• 7:44
  Speaker 1: and Chicago in particular, a smaller, more manageable, more rational,
• 7:50
  Speaker 1: much more affordable version of New York City. But a
• 7:53
  Speaker 1: lot of people we spoke to there in Chicago, in Detroit,
• 7:58
  Speaker 1: in Milwaukee, all the Great Lakes, like what we talk
• 8:02
  Speaker 1: about on the East Coast with beach property, Hampton's Fire Islands,
• 8:08
  Speaker 1: Jersey Shore, Delaware, go down the whole list. They all
• 8:12
  Speaker 1: talk about some people have homes on Lake Michigan, or
• 8:15
  Speaker 1: if you're coming from Grand Lake Streams, there's just a
• 8:19
  Speaker 1: run of vacation properties and the prices seem almost reasonable.
• 8:25
  Speaker 1: What are you seeing in the Midwest market for real
• 8:28
  Speaker 1: estate prices?
• 8:29
  Speaker 2: So it's always really dangerous to sort of make a
• 8:33
  Speaker 2: living in the East and then go to the Midwest
• 8:36
  Speaker 2: and look at housing prices, and it's almost entertainment because
• 8:43
  Speaker 2: the affordability, you know, to buy a vacation home and
• 8:47
  Speaker 2: say Wisconsin, north of Chicago where I used to live,
• 8:53
  Speaker 2: you know, is you know, a reasonable but not to locals, right,
• 8:58
  Speaker 2: And my head.
• 8:59
  Speaker 1: Trey in the office after this hole we had a
• 9:02
  Speaker 1: big event in Chicago. He's like, oh my god, I
• 9:05
  Speaker 1: can't believe how reasonable everything is here, Like you and
• 9:09
  Speaker 1: your fiance should move there. The only catches we have
• 9:12
  Speaker 1: to cut your salary forty percent because that's the local wage.
• 9:16
  Speaker 1: So clearly home prices track local median income. I don't
• 9:23
  Speaker 1: remember if it was your research note that talked about
• 9:27
  Speaker 1: or maybe it was Paul Krugman's talked about all New
• 9:32
  Speaker 1: Jersey as one of the densest populations in the country
• 9:38
  Speaker 1: with one of the highest home price in the country
• 9:44
  Speaker 1: but an even higher median income on average. And so
• 9:50
  Speaker 1: it turns out that paying a high price for homes
• 9:54
  Speaker 1: in New Jersey is actually cheaper then an inexpensive home
• 10:02
  Speaker 1: in another part of the country relative to your income.
• 10:05
  Speaker 1: So that really begs the question how significant is local
• 10:09
  Speaker 1: income to vacation properties, lakefront homes and beach houses.
• 10:16
  Speaker 2: Well, you know, it's in danger of saying it depends,
• 10:22
  Speaker 2: but it depends.
• 10:24
  Speaker 1: You know.
• 10:25
  Speaker 2: I think about a market that that I lived in
• 10:28
  Speaker 2: and cover market like Manhattan, which is known for lots
• 10:32
  Speaker 2: of pidtees, you know, places in the city that people
• 10:36
  Speaker 2: in the suburbs buy homes there. If you look at
• 10:40
  Speaker 2: the median income in Manhattan, it has no bearing on
• 10:45
  Speaker 2: the price of housing because there's such an international and also,
• 10:51
  Speaker 2: you know, affluence that gravitates there. So so the meeting
• 10:56
  Speaker 2: income doesn't really relate. It's you know, it's like, you know,
• 11:00
  Speaker 2: seventy thousand or some you know, you know, and the
• 11:04
  Speaker 2: median home price in Manhattan is about a million two,
• 11:08
  Speaker 2: which it gets you a studio, right, maybe a small
• 11:12
  Speaker 2: one bedroom in a walk up.
• 11:14
  Speaker 1: So since you're mentioning foreign buyers, let's talk about what's
• 11:19
  Speaker 1: going on with the public policy and in particular the dollar.
• 11:25
  Speaker 1: We've seen the dollar full off from its highs recently.
• 11:28
  Speaker 1: You talked about this in a recent research note. What
• 11:32
  Speaker 1: does the strength of the dollar mean for potential buyers
• 11:37
  Speaker 1: of real estate from overseas? And what has let's just
• 11:41
  Speaker 1: call the damage to America the brand the black guy
• 11:46
  Speaker 1: that we sort of see Uncle Sam having. What does
• 11:49
  Speaker 1: that mean for outside purchasers.
• 11:52
  Speaker 2: At least at this point, it's an offset in other words,
• 11:55
  Speaker 2: that we've had periods of time where you know, you know,
• 12:01
  Speaker 2: if you're coming from Europe, you were enjoying a fifty
• 12:04
  Speaker 2: percent discount off the currency play for a US home,
• 12:09
  Speaker 2: and so New York, you know, had a tremendous would
• 12:14
  Speaker 2: have a tremendous surge every time the dollar got weaker.
• 12:18
  Speaker 2: We had periods I want to say two thousand and six,
• 12:22
  Speaker 2: two thousand and seven where I called it the Irish
• 12:24
  Speaker 2: Carpenter syndrome where you had sort of, you know, people
• 12:29
  Speaker 2: of modest means in Ireland getting fifty percent discounts on
• 12:32
  Speaker 2: million dollar condos in midtown.
• 12:35
  Speaker 1: Well about the other coast, what about Japan, China, Korea,
• 12:39
  Speaker 1: It's Asia buying San Francisco, La Joia, San Diego, and
• 12:45
  Speaker 1: even across the border of Vancouver.
• 12:47
  Speaker 2: Well, a big driver is access to university, high quality universities,
• 12:54
  Speaker 2: and so the Asian demand, that's one of the amenities
• 12:58
  Speaker 2: they're really looking for, you know, sort of over the
• 13:01
  Speaker 2: long run. The problem with the weaker currency or the
• 13:09
  Speaker 2: weaker dollar is that the state of immigration and the
• 13:14
  Speaker 2: sort of what I call the tariff tantrums and the
• 13:17
  Speaker 2: uncertainty that is abound at the moment has essentially at
• 13:23
  Speaker 2: least you know, in my anecdotal observation at this moment
• 13:29
  Speaker 2: is you know, it's offsetting the benefit of a discount
• 13:33
  Speaker 2: that we're not seeing the influx of international demand that
• 13:38
  Speaker 2: we normally would expect during this this type of dollar environment.
• 13:44
  Speaker 1: So, since you mentioned the tariff tantrum that seems to
• 13:49
  Speaker 1: be keeping mortgage rates elevated. Doesn't really matter to luxury
• 13:54
  Speaker 1: properties three four five million dollars. Those are mostly cash
• 13:58
  Speaker 1: deals I've learned from in your research notes. But what
• 14:03
  Speaker 1: about you know, younger folks in their not in their
• 14:07
  Speaker 1: twenties and thirties, but perhaps in their late thirties and
• 14:09
  Speaker 1: forties who want a vacation property. They're not spending tens
• 14:14
  Speaker 1: of millions of dollars. They're spending something a little more reasonable,
• 14:18
  Speaker 1: but they're probably putting ten twenty thirty percent down and
• 14:21
  Speaker 1: putting a mortgage on it. What is these elevated mortgage
• 14:26
  Speaker 1: rates doing to that market?
• 14:29
  Speaker 2: So it's restraining it. The way to think of rates
• 14:35
  Speaker 2: is they're sort of you know, stuck at sort of
• 14:39
  Speaker 2: you know, just below seven percent on a fixed rate.
• 14:42
  Speaker 2: When you when you're looking at a second home purchase,
• 14:46
  Speaker 2: you probably want to add a half to three quarters
• 14:49
  Speaker 2: of a percent to the rate of a primary residence.
• 14:54
  Speaker 1: So it's more for a second home mortgage than a
• 14:57
  Speaker 1: primary home.
• 14:59
  Speaker 2: Yes, yes, And the underwriting is a little tougher as well.
• 15:03
  Speaker 2: There's ratios that are a little bit tighter, you know,
• 15:08
  Speaker 2: And that's the way to think of it. However, you know,
• 15:13
  Speaker 2: you know, if you're looking for like a break in pricing,
• 15:18
  Speaker 2: you know, pricing now with the uncertainty and the rates
• 15:21
  Speaker 2: being stuck at an elevated level, the rate of price
• 15:25
  Speaker 2: growth is starting, you know, has been really over the
• 15:27
  Speaker 2: last few months, starting to ratchet down a bit.
• 15:31
  Speaker 1: So it's plateauing.
• 15:32
  Speaker 2: Yeah, I would say plateauing is probably a fair term
• 15:36
  Speaker 2: in some markets, even slipping a bit. We still have
• 15:40
  Speaker 2: markets that are rising, but those tend to be primary
• 15:44
  Speaker 2: housing markets, like if you're in New York City. Metro
• 15:49
  Speaker 2: Long Island grew ten percent last year, you know, big numbers.
• 15:54
  Speaker 1: So let's since we mentioned the non luxury second home.
• 16:00
  Speaker 1: Let's talk demographics a little bit. What about millennials and
• 16:04
  Speaker 1: Gen z are they remember during the twenty tens, they
• 16:09
  Speaker 1: stared clear from the initial housing market. They were forming
• 16:14
  Speaker 1: households at a very low rate. Along the same time
• 16:18
  Speaker 1: as builders had kind of pivoted post crisis to multifamily
• 16:23
  Speaker 1: and away from single family homes. Not only are those
• 16:27
  Speaker 1: generations now buying first homes, some of them, I hesitate
• 16:32
  Speaker 1: say many of them, but some of them are looking
• 16:34
  Speaker 1: at second homes. How do you think about demographics and
• 16:38
  Speaker 1: where these folks look at a vacation property.
• 16:42
  Speaker 2: So you're right, we're absolutely seeing the millennials first just
• 16:49
  Speaker 2: you know, push into home ownership, not just home ownership,
• 16:53
  Speaker 2: but second home owner ownership. If you think about this
• 16:59
  Speaker 2: at a top sort of at a top level, one
• 17:02
  Speaker 2: of the things that's been changing with the baby boomer
• 17:07
  Speaker 2: generation is buying homes or giving what the kids would
• 17:16
  Speaker 2: wait until their parents passed you. We were seeing a lot,
• 17:20
  Speaker 2: you know, like twenty thirty years.
• 17:22
  Speaker 1: Of DeVos is the technical term. You're making the gift
• 17:26
  Speaker 1: while you're alive, to.
• 17:29
  Speaker 2: Glow the basket and the glow right, and and that's
• 17:34
  Speaker 2: a thing and just sort of you know, the quick
• 17:39
  Speaker 2: observation is in the eighties when I started up my company,
• 17:47
  Speaker 2: it was very common for, you know, in Manhattan, for
• 17:51
  Speaker 2: parents to buy like a studio apartment sort of the
• 17:55
  Speaker 2: size of a hotel room for their kids that were
• 17:58
  Speaker 2: going to college in that and it would become a
• 18:01
  Speaker 2: piedotar for the family down the road. Now they're buying
• 18:05
  Speaker 2: three four five million dollar apartments, and as opposed to
• 18:10
  Speaker 2: little efficiency type places, we're seeing a much bigger price
• 18:16
  Speaker 2: tag on this, as you know and I and that
• 18:21
  Speaker 2: is giving these this generation sort of a jump start.
• 18:25
  Speaker 1: So you're kind of employing I don't want to say
• 18:28
  Speaker 1: fractional ownership or co ownership. It's multiple generations of a
• 18:33
  Speaker 1: family using the same second property. But what about those
• 18:37
  Speaker 1: sort of things We've seen business models of fractional ownership,
• 18:41
  Speaker 1: or I've heard stories of close friends two or three
• 18:45
  Speaker 1: families co owning a property. Is this a real trend
• 18:49
  Speaker 1: or is this still a rounding error?
• 18:53
  Speaker 2: To me, it's more of a rounding error. You know,
• 18:55
  Speaker 2: it's an interesting storyline, but I'm not seeing that it's
• 19:00
  Speaker 2: happening on the margin more than anything else. What's really
• 19:04
  Speaker 2: interesting in the world of airbnb and investor ownership. You know,
• 19:13
  Speaker 2: lenders there's a higher rate for that, right, a higher
• 19:17
  Speaker 2: mortgage rate if you're financing. But you know, to my understanding,
• 19:23
  Speaker 2: you can as long as you on a second home,
• 19:25
  Speaker 2: as long as you control the house, meaning you don't
• 19:29
  Speaker 2: have tenants in it for more than six months, you
• 19:32
  Speaker 2: can claim it as a second residence.
• 19:35
  Speaker 1: What does that do for you tax wise if it's
• 19:38
  Speaker 1: a second residence, as always do a business.
• 19:41
  Speaker 2: That I don't know, you know, every situation is so different,
• 19:45
  Speaker 2: but I know that with with airbnbs, if you're using
• 19:50
  Speaker 2: a professional manager to manage it for you, then it's
• 19:53
  Speaker 2: considered an investor property. It's it's not. And you know
• 19:58
  Speaker 2: we've had like in the southwestern US, you know, there's
• 20:01
  Speaker 2: a massive oversupply of Airbnb properties that are not sort
• 20:05
  Speaker 2: of covering the monthly costs. So I'm not necessarily encouraging that.
• 20:11
  Speaker 1: There's going to be some supply coming on the market.
• 20:13
  Speaker 1: When people say, hey, this just isn't worth the headache,
• 20:16
  Speaker 1: is that the implication?
• 20:17
  Speaker 2: Yeah, yeah, that that you know, I'm not getting the
• 20:19
  Speaker 2: returns that I that I thought I would get. You know,
• 20:23
  Speaker 2: because everybody had the same idea at the same time,
• 20:26
  Speaker 2: there's certainly a place for it, but I think it's
• 20:29
  Speaker 2: been a little bit over overused. And you know, the
• 20:34
  Speaker 2: other thing is, and you know, when we think about
• 20:37
  Speaker 2: Airbnb versus being an investor, a pure investor in renting
• 20:42
  Speaker 2: it out for you know, for six months or a year,
• 20:46
  Speaker 2: is that you don't get to use the property right
• 20:50
  Speaker 2: and let you know, And and that's been one of
• 20:52
  Speaker 2: the selling points of Airbnb as a you know, as
• 20:55
  Speaker 2: a landlord. And then the other thing is that generally,
• 20:59
  Speaker 2: you know, when you look at their data, they generate
• 21:02
  Speaker 2: about two and a half times the rent per square
• 21:04
  Speaker 2: foot of a one year lease, and some even generate
• 21:09
  Speaker 2: more like one fine stay as a sort of luxury Airbnb,
• 21:13
  Speaker 2: and it's like three times.
• 21:17
  Speaker 1: Rentals are more expensive than longer term rentals. Yes, so
• 21:21
  Speaker 1: let's I think everybody knows what are the super hot destinations,
• 21:26
  Speaker 1: but I know the super hot vacation home destinations. But
• 21:31
  Speaker 1: I know, you crunch a lot of data. What do
• 21:34
  Speaker 1: you see as sort of up and coming? What do
• 21:36
  Speaker 1: you see as hot that are probably going to surprise
• 21:39
  Speaker 1: most people who pay attention to real estate.
• 21:43
  Speaker 2: Well, I think if New Hampshire and from hot, which
• 21:46
  Speaker 2: isn't really a.
• 21:48
  Speaker 1: Or a ski ski location.
• 21:50
  Speaker 2: Yeah, that's probably my my built in bias for going
• 21:55
  Speaker 2: north when the kids are young for every vacation and
• 21:58
  Speaker 2: not south. But there just seems to be especially probably
• 22:05
  Speaker 2: more New Hampshire than Vermont, a tremendous at least in
• 22:09
  Speaker 2: the northeast. There was a from the pandemic through now
• 22:13
  Speaker 2: there was a tremendous boom in New Hampshire housing because
• 22:20
  Speaker 2: of the second home phenomenon. What's really interesting something that
• 22:24
  Speaker 2: I hadn't paid much attention to until the last couple
• 22:28
  Speaker 2: of years, is with the whole push for rto you
• 22:32
  Speaker 2: return to office, some people that are buying second homes
• 22:37
  Speaker 2: really want to be cognizant of their employers', you know,
• 22:42
  Speaker 2: future policies on how often you have to be in
• 22:46
  Speaker 2: the office, because.
• 22:48
  Speaker 1: I know I could take a cannonball from West Hampton
• 22:53
  Speaker 1: into Manhattan and it's marginally longer than my normal commute
• 22:59
  Speaker 1: into the city. But it raises an interesting question, how
• 23:04
  Speaker 1: has the rise of the remote work, work from home
• 23:08
  Speaker 1: and the return to office, how is that impacting buyer
• 23:11
  Speaker 1: preferences for vacation homes and where they're located.
• 23:17
  Speaker 2: So there was a word that somebody I was giving
• 23:22
  Speaker 2: a presentation, you know, right after the sort of dark
• 23:26
  Speaker 2: days of the pandemic, and I remember a real estate agent,
• 23:30
  Speaker 2: you know, I was trying to describe that, you know,
• 23:32
  Speaker 2: people moving to a second home market because they could
• 23:37
  Speaker 2: work remotely. I called it co primary basically it was
• 23:42
  Speaker 2: a co primary residence. So what people what I found,
• 23:46
  Speaker 2: people coming out of a pandemic were looking for quality
• 23:50
  Speaker 2: of schools, if they had a young family. You know,
• 23:53
  Speaker 2: they were looking at things that you normally don't consider internet,
• 23:57
  Speaker 2: you know, quality, things that you normally only don't consider
• 24:01
  Speaker 2: when you're buying a second home. The hall day I
• 24:02
  Speaker 2: would be about second home is to get away from
• 24:05
  Speaker 2: it all. But that's been sort of co opted by
• 24:10
  Speaker 2: the need to work or the desire to reduce commuting
• 24:16
  Speaker 2: or you know, you know who doesn't like to maybe
• 24:20
  Speaker 2: work in their pajamas.
• 24:21
  Speaker 1: Right, So, how would you recommend, given all of the apps,
• 24:25
  Speaker 1: all of the data, all of the things that are
• 24:27
  Speaker 1: out there, someone shopping for a vacation property, how should
• 24:31
  Speaker 1: they be using an app like let's say Zillow or
• 24:35
  Speaker 1: redfin in order to help them find a vacation property
• 24:39
  Speaker 1: they really want to own.
• 24:42
  Speaker 2: Right, So, you know, the apps make it all accessible pictures.
• 24:48
  Speaker 2: You know, you can see lots of information, but this
• 24:54
  Speaker 2: sounds old school. But once you have that information, you
• 24:57
  Speaker 2: know you have you know, you've looked at a you know,
• 25:01
  Speaker 2: online a dozen properties that sort of you know, make
• 25:04
  Speaker 2: sense to you. You really need to see an agent,
• 25:09
  Speaker 2: you know, you need to talk to a human being,
• 25:12
  Speaker 2: you know, and someone that's a local expert in a market,
• 25:16
  Speaker 2: which is a whole other thing which you can through
• 25:20
  Speaker 2: these apps figure out, you know, does their name pop
• 25:22
  Speaker 2: up all over the place, and have them talk you
• 25:27
  Speaker 2: through it if there's a moment in your life that
• 25:31
  Speaker 2: you need handholding, even though you think you know everything.
• 25:35
  Speaker 2: I think it's home buying you do, and you know
• 25:38
  Speaker 2: all the sort of stories while they're just trying to
• 25:40
  Speaker 2: sell you out. Yeah they're trying to sell you a house,
• 25:43
  Speaker 2: but they're also they're also a wealth of information and
• 25:48
  Speaker 2: you can't get that online.
• 25:50
  Speaker 1: Huh. Really really interesting stuff. So final question in two parts,
• 25:56
  Speaker 1: what sort of advice would you give somebody who asks, Hey,
• 26:00
  Speaker 1: I'm looking to buy a luxury property in a hot area.
• 26:03
  Speaker 1: And what advice would you give to a millennial someone
• 26:07
  Speaker 1: in their late thirties or forties, Hey, we'd love to
• 26:09
  Speaker 1: have some reasonable vacation property.
• 26:12
  Speaker 2: What do you tell those folks? So the first is
• 26:16
  Speaker 2: incredibly obvious. There's so much information at your fingertips in
• 26:21
  Speaker 2: terms of understanding the cost the additional mortgage expense if
• 26:26
  Speaker 2: you're going that route. To think about the equity that
• 26:31
  Speaker 2: you have in your existing primary residence, if you have one.
• 26:36
  Speaker 2: You know, right now, we're you know, basically looking at
• 26:39
  Speaker 2: record or near record home equity because of the price
• 26:44
  Speaker 2: growth that we've seen over the last five seven years.
• 26:48
  Speaker 2: And maybe that's a financing vehicle or an acquisition vehicle
• 26:52
  Speaker 2: for your purchase.
• 26:53
  Speaker 1: Certainly down the payment you could borrow from your home,
• 26:56
  Speaker 1: even though it will have to be disclosed to the bank.
• 27:00
  Speaker 2: Yes, yes, you know, and you know banks. You know listen,
• 27:05
  Speaker 2: if you have a boatload of equity in your home,
• 27:09
  Speaker 2: you know it's you know, I see this quite a
• 27:13
  Speaker 2: bit where people use that to buy a smaller home,
• 27:15
  Speaker 2: a second home.
• 27:16
  Speaker 1: And you know, we as we've seen in the past,
• 27:19
  Speaker 1: leveraging up your primary residence to buy a luxury property.
• 27:23
  Speaker 1: How could that ever go wrong?
• 27:24
  Speaker 3: Right right, right right exactly, you know, and and the
• 27:31
  Speaker 3: sort of saving grace to that, unlike during the financial
• 27:36
  Speaker 3: crisis is that credit conditions remain tight, so lenders aren't
• 27:42
  Speaker 3: just giving away.
• 27:45
  Speaker 2: Loans. If you have a pulse or foger mirror like
• 27:47
  Speaker 2: we had during the financial crisis, it's actually a thing.
• 27:52
  Speaker 2: You know, they're actually doing their due diligence and.
• 27:58
  Speaker 1: Doing their jobs.
• 27:59
  Speaker 2: Go figure, that's a crazy concept. It's kind of a
• 28:02
  Speaker 2: crazy concept. But let me refocus you.
• 28:05
  Speaker 1: Let me refocus you on the luxury question, because I
• 28:08
  Speaker 1: know you bought a property not too long ago. I
• 28:12
  Speaker 1: bought a property not too long ago, and I was
• 28:14
  Speaker 1: I learned from your experience. I was completely frustrated by
• 28:17
  Speaker 1: people making all cash offers for over the asking price,
• 28:23
  Speaker 1: and I'm like, I can't believe we lost another house.
• 28:26
  Speaker 1: I thought we were in. So someone comes to you
• 28:29
  Speaker 1: and says, I'm doing pretty well. I got a nice
• 28:32
  Speaker 1: bonus this year. We'd love to get a vacation property,
• 28:35
  Speaker 1: and we're not.
• 28:36
  Speaker 2: We're looking over.
• 28:37
  Speaker 1: Two million dollars. We're not going to go crazy, but
• 28:40
  Speaker 1: we have a decent budget. What advice do you give
• 28:42
  Speaker 1: somebody like that.
• 28:44
  Speaker 2: Well, the first thing is, you know, if you're in
• 28:46
  Speaker 2: a housing market with limited inventory New York Metro, the
• 28:53
  Speaker 2: share of bidding worth of transactions is in the forty
• 28:58
  Speaker 2: ish percent, meaning that forty percent of the closings the
• 29:02
  Speaker 2: buyer paid over ask. That's a reality.
• 29:06
  Speaker 1: Still twenty twenty five, that's going on.
• 29:08
  Speaker 2: Absolutely, it is not what it was six months ago.
• 29:13
  Speaker 2: Is fifty more than fifty percent in the New York
• 29:16
  Speaker 2: metro area, you know, outside of the city. The city
• 29:18
  Speaker 2: isn't seeing that city is a much lower number. But
• 29:23
  Speaker 2: but that's sort of the reality. But then you know,
• 29:25
  Speaker 2: if you go to other markets, like we were talking
• 29:28
  Speaker 2: about the Sun Belt, you know that that's almost non existent.
• 29:32
  Speaker 2: I just still think that the sellers are embedded with
• 29:39
  Speaker 2: sort of a bravado that you know, is still you know,
• 29:44
  Speaker 2: was built up during the pandemic. And I also think
• 29:48
  Speaker 2: that buyers are sort of have a bravado that they're
• 29:52
  Speaker 2: going to get the most amazing deal, and so that
• 29:56
  Speaker 2: the gap between them, you know, is a lesson and
• 30:00
  Speaker 2: it takes the parties a while to you know, to
• 30:06
  Speaker 2: sort of meet halfway. Both have to sort of capitulate
• 30:10
  Speaker 2: to the actual market conditions. And part of what's happened
• 30:14
  Speaker 2: things have happened so quickly, just with the tariffs and
• 30:17
  Speaker 2: the confusion, I have this sort of cocumyey theory that
• 30:21
  Speaker 2: came up out of you know, the you know, when
• 30:24
  Speaker 2: we think about tariff policy having foot flopped at least
• 30:28
  Speaker 2: fifty times, there's this uncertainty that we're sort of all
• 30:33
  Speaker 2: living with, and in some ways, that sort of chaos
• 30:37
  Speaker 2: or uncertainty as it relates to housing becomes a constant
• 30:42
  Speaker 2: as opposed to this new thing. It's sort of, you know,
• 30:46
  Speaker 2: it's a reality, and if you're in the housing market,
• 30:50
  Speaker 2: you have to be sort of aware that there is
• 30:53
  Speaker 2: a chaos to it still and don't be afraid of it.
• 30:58
  Speaker 1: So to wrap up those people searching for a vacation property,
• 31:02
  Speaker 1: a lake house, a beach house, a mountain house, we've
• 31:05
  Speaker 1: seen some uptick in the amount of supply, and perhaps
• 31:09
  Speaker 1: in some areas prices have stopped going up, at least
• 31:13
  Speaker 1: not going up as aggressively as they have been. But
• 31:17
  Speaker 1: be aware it's very regional, it's very geographic specific. There
• 31:22
  Speaker 1: is a demand for more of these properties, especially from
• 31:26
  Speaker 1: millennials and soon gen z.
• 31:28
  Speaker 2: Keep your eye on what's.
• 31:29
  Speaker 1: Going on, get informed, and work with a local expert
• 31:32
  Speaker 1: to help find your dream vacation property. I'm Barry Redolts,
• 31:37
  Speaker 1: You're listening to Bloombergs at the Money