The economic consequences of subsidized homeownership
by Stephen Slivinski
If policies that encourage homeownership are geared toward the purchase of primary owner-occupied residences, how can we explain the growth in the purchase of second homes?
As seen in the chart, the number of homes that are classified by the U.S. Census Bureau as those meant for "occasional" or "seasonal" use has grown from just over 3.6 percent of total housing units owned in 1965 to about 5 percent in 2007.
A 2006 report published jointly by the Mortgage Bankers Association, the Philadelphia-based company Radian, and the Research Institute for Housing America offers some answers to that question. Authored by economist Gary V. Engelhardt of Syracuse University, it suggests that the trends are being driven by the baby boomers. Engelhardt discovered that 15 percent of households comprised of individuals aged 50 and older who already owned their main residence also owned a second home in 2004.
This isn't a departure from the behavior of previous generations, either. "The report indicates that baby boomers are not acting differently than their parents when it comes to second homeowernship," said Doug Duncan, senior economist of the Mortgage Bankers Association at the time of the report's release. What has changed is the size of that group. The increase in second home purchases can be largely explained by the growth in that 50-years-and-older population cohort.
These homes seem to function mainly as vacation getaways. Half of second homeowners spend two weeks or less per year in these homes, and two-thirds of them spend four weeks or less. It also doesn't seem that lower mortgage rates have much to do with the increase in second home purchases recently. Only 17 percent of second homeowners have a mortgage on their second home.
- Matthew Conner & Stephen Slivinski