Download Market Update as PDF

A common investment strategy is to buy properties in resorts and travel destinations.  After all, “they aren’t making any more of it.”  Our Resorts and Destinations index includes 42 metropolitan areas centered on or near to such locations.  These are mostly seaside or mountain destinations.  Listing (for sale) prices in these markets have experienced even stronger declines than the national average in the last 18 months. 

This finding will surely surprise many investors already sitting on properties in these areas.  But there are many factors that have contributed to the decline in property values in leisure markets.  These markets have a higher component of discretionary housing investments,  so they easily turn into a first line of defense for liquidating assets in an economic downturn.  An uncertain economy and higher fuel prices have cut vacation travel (i.e., demand for property) while higher energy and insurance costs have inflated the costs of ownership.

In the short term, leisure markets may hold their value better or grow faster.    But over the long term, our index of 42 markets suggests that long-term appreciation is only slightly higher than more diversified markets (4.3% vs. 4.1%) at the expense of higher volatility, as we’re seeing now.