The economy is in shambles.
The phrase "the threat of foreclosure" has become a familiar mantra. And many people have put on hold their dream of owning a second home - a cottage on a lake, a pied-a-terre in the city, a "snowbirder" in Florida or maybe a house in the Hamptons where they could escape the daily grind.
Whether near-retirement homeowners forge ahead with plans to buy a second home or put them on hold is more a matter of how financially secure they feel. But for some boomers who took the plunge before the recession, the picture is far from dismal.
Interior decorator Lisa Rose owns two mortgaged, multimillion-dollar homes, one of which is for sale, and is always in the market for a new investment.
"When I built my North Haven house nine years ago, it was valued at $6 million and it's now on the market for $8 million," she said.
Rose, 59, divides her time between North Haven and her $1.5 million second home in Palm Beach Gardens, Fla., using seasonal rental income of up to $225,000 to cover costs. For Rose, second-home ownership has evolved into a career. "When the North Haven house sells, I'll buy or build another place in the Hamptons," she explained.
Her "trading-up" strategy began 30 years ago with a modest investment, the purchase of an underpriced "fixer-upper" with potential for improvement. Generally, a property is underpriced because it needs repairs or cosmetic work or because the economy, like now, is in a recession.
"I've done it many times over the years and always made a profit, sometimes doubling my investment," Rose said.
Location, location, location
Even for Rose, investment home ventures can be much more modest. But regardless of the size and price tag, experts say that guidelines for buying a second home remain the same. For families with growing children, a top priority should be location, location, location.
"If you buy a vacation home in an area where your children can't find friends or recreation they like, they will refuse to go with you as soon as they're old enough to rebel," said Diane West, a second-home specialist at Agawam Realty in Southampton Village.
West said her clients' motivations for buying second homes vary between the vacation home buyer and the investor. "I see the investment angle as equally strong these days, probably because of the stock market downturn," she said.
Local real estate professionals estimate that roughly half of all second homes are purchased for rental income and long-term capital gain, while the other half are purchased for personal and recreational use.
However, Seth Forman, chief planner for the Long Island Regional Planning Council, disagrees. He cites a 2003 American Housing Survey conducted by the U.S. Census Bureau that indicates only 10 percent of second home purchases were bought as investments, while 35 percent were for personal or recreational use. The remainder were either for seasonal use, occupation by relatives, or were unoccupied at the time of the survey.
"There are about 50,000 Long Island residents who own second homes either in Nassau or Suffolk counties or elsewhere in the country or around the world," Forman reports, "and of the 970,000 housing units on Long Island, about 40,000 to 50,000 are seasonal homes. Most of those are on the East End."
Previous American Housing Survey studies also found that about one-fourth of second home purchases over the past 10 to 15 years were by boomers planning for retirement.
A slight upward trend
Walter Malony, spokesman for the National Association of Realtors in Washington D.C., notes that although second-home sales peaked about three years ago, subsequent research shows a slight upward trend. His own reason for buying a getaway in West Virginia, a two-hour drive from his D.C. primary home, was purely emotional, but it has paid off.
"I got that itch in my mid-40s to have a cabin on a mountain, and everyone told me I was throwing my money away. But you know what? My place has tripled in value since I bought it 15 years ago, so I came out ahead on both counts."
Others say they also have no regrets about their second homes.
Nadia Barisic, 58, a real estate agent, and her husband Peter, 60, an accountant, scouted Long Island for a getaway to share with their two married children. "We all live in the Bellerose Village area and we all have hectic schedules," Nadia said. "We looked in the Hamptons but it was just too far, so we tried Long Beach and four years ago we found the perfect place - a two-bedroom condo right on the water for $600,000," she said. "It's only 45 minutes away, so we can go anytime for even just a day and the maintenance is all done for us. It's such fun that we can see our children and grandkids on the beach from our balcony. As for retirement, who knows? Things may change by then. But a waterfront condo will always be a good investment."
For Amy and Todd Hase, who are both in their mid-40s, a two-hour drive from their Southampton home to the airport gets them a bit closer to the second home they bought six years ago in Rouen, France. They spend summer months vacationing with their two children and scouting the countryside for antiques to resell in their furniture business.
"It's wonderful for the kids," Amy Hase said. "They're learning about the language, the currency, the ways other cultures live."
Barbara Ford, director of the Multiple Listing Service Long Island Board of Realtors, said that while buying a second home is often an emotional decision based on a desire to own a change-of-scene place, the present buyer's market makes it a good time for those who still have some discretionary funds.
"People with secure jobs or businesses and excellent credit can look to them (second homes) for the prospect of long-term use and family getaways and retirement," she said, "but every buyer's agenda is unique."