The price of residential real estate has skyrocketed in the past two years. No single reason accounts for this, but several have contributed.
The employment and compensation of most middle and upper-class Americans remained fairly high through the two years of the COVID-19 pandemic. Wealth has been helped by a soaring stock market.
Tens of thousands of people have decided to relocate inland from expensive coastal cities. Home prices in New York and San Francisco are often three times the national average. Many small cities also have a perceived better quality of life. Ironically, the rush to many of these smaller cities has caused their residential real estate prices to surge.
Low mortgage rates also have contributed to residential purchase activity, although it appears the period of low rates has ended.
Finally, the COVID-19 pandemic caused many companies to shutter offices and ask employees to work from home. Some of these people will not return to traditional offices, which means they can live where they please.
Some Americans, many of them well-to-do, have second homes. They may use them as weekend homes and for vacations. Others use them to make money via rentals. Some split time and use them for both.
The just-released Best Places to Buy a Beach House 2022 research report, from vacation rental manager Vacasa, used data from the home price website Redfin. Vacasa used its own data to calculate return on investment for people who rent their homes. The report only includes places that are on a body of water.
The report points out:
According to a recent report from Redfin, buyer demand for second homes was up 87% at the start of 2022 from pre-pandemic levels, and while other areas of the real estate market may begin to normalize, second home sales are expected to remain steady.
The final list was determined largely by the cap rate, which is the rate of return on real estate investments.
The list is topped by Gulf Shores, Alabama, which is on the Gulf of Mexico between Mobile and Pensacola. These are the 10 best cities to own a vacation home:
| Market | Cap Rate | Median Sale Price |
|---|---|---|
| Gulf Shores, Ala. | 10.2% | $402,905 |
| Corolla, N.C. | 9.5% | $608,953 |
| Navarre Beach, Fla. | 6.6% | $382,392 |
| New Buffalo, Mich. | 6.6% | $569,873 |
| Daytona Beach, Fla. | 6.5% | $247,960 |
| Galveston, Texas | 6.4% | $340,559 |
| Hatteras Island, N.C. | 6.4% | $482,447 |
| Rockaway Beach, Ore. | 6.1% | $384,152 |
| Port St. Joe, Fla. | 6.1% | $360,721 |
| Lahaina, Hawaii | 5.8% | $725,000 |
Click here to see in which cities buying a home is most expensive.
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