The market for multimillion-dollar vacation homes has experienced a slow but steady recovery since the housing market crashed, with a slight increase in sales of luxury getaways for the ultrarich each year.
But builders and sellers of vacation properties aimed at the upper middle class said they are struggling to find a marketing pitch that will resonate with prospective buyers who still have the means but seem to have lost the will.
Jim Chaffin, a Colorado recreational real-estate developer, was among a group of panelists who spoke earlier this month about the challenges that vacation-home sellers face at a time when the only thing wealthy Americans feel inclined to flaunt is their frugality.
Chaffin, chairman of Aspen-based Chaffin Light LLC, said the challenge is on developers to construct a more relevant, persuasive pitch that keys into would-be buyers’ desire to feel smart, responsible and practical.
“It is no longer because you can or because you deserve it,” said Chaffin, speaking on the May 19 panel at the Urban Land Institute‘s 2011 Spring Council Forum in downtown Phoenix.
Chaffin and others said luxury vacation-home developers are likely to shift their focus from straight sales to lower-cost alternatives such as timeshares, fractional ownerships and private residence-club memberships – all of which allow consumers to vacation in style for considerably less than the cost of buying a luxury vacation home.
In addition, they said, future vacation-home developers will need to build in places that are easily accessible from major metropolitan areas, set in breathtakingly beautiful locales and offer a compelling experience in addition to a pretty view.
Drew Brown, chairman of Scottsdale-based developer DMB Associates Inc., who moderated the Urban Land Institute panel discussion, said that timeshare and fractional-ownership projects have struggled along with traditional sales in the current recession.
Brown said that is likely due to public perception that timeshares, fractional shares and club memberships are difficult to resell if the owners want or need out of the deal.
Panelist Chuck Cobb, chief executive of Cobb Partners, a Florida-based investor in resort properties, said resort-community developers and operators still have a long way to go toward recovery, with a huge inventory of vacation homes yet to be sold.
He said the most successful among them likely will offer a range of options for buyers, renters and traditional resort guests.
Vicki Kaplan is a Scottsdale-based real-estate agent who represents buyers and sellers of fractional-ownership shares in vacation villas at the Rocks Luxury Residence Club, a resort community in north Scottsdale managed by Troon Golf.
Kaplan, of Arizona Best Real Estate, said that the resale market for fractionals has been slow lately and that it can take up to a year to find a qualified buyer.
Fractional ownership differs from timeshare in several ways. Unlike timeshare buyers, fractional owners actually purchase a portion of the vacation-home or condo.
Private residence clubs are another variation on the timeshare concept. With residence clubs, participants buy a membership that entitles them to a certain amount of guaranteed vacation time at the resort.
Buyers of timeshares, fractional shares and residence-club memberships all must sell their stake in the resort community on the open market to be released from monthly homeowners’ association or maintenance-fee obligations, which can be considerable. At the Rocks, the standard fraction is one-seventh, which entitles the owners to a guaranteed six weeks of occupancy each year.
They can stay even longer and can use any of the resort’s seven fractionally owned villas as long as no one else is using them.
In addition, the resort community participates in a “reciprocity program,” administered by Timbers Resorts, a fractional-ownership and private residence-club resort operator based in Carbondale, Colo.
The program allows owners to stay at any of the company’s nine participating resort communities, which include locations in Colorado, California, Mexico and Italy.
Kaplan said fractional shares in the Rocks have sold recently for under $200,000 – considerably less than the developer’s original sale price of $325,000 to $335,000.
The monthly HOA dues, which cover maintenance plus services comparable to a high-end resort and spa, is about $900 a month, 12 months a year.
Kaplan said the recession has made it much easier for owners to take advantage of the reciprocity program because sister Timbers communities aren’t as likely to be fully occupied at any given time.
Still, Kaplan was quick to point out that fractional ownership is not for everyone. When talking to potential buyers, she spends a good portion of the time explaining the downside of buying a fractional vacation-home share.
Kaplan said she would much rather have prospects walk away than buy and later realize they made the wrong decision for their particular lifestyle.
For instance, she said, fractional owners can’t book six solid weeks at their villa in the winter, so if the buyer is looking for a winter home, a fractional is not a good fit.
About two years ago, banks stopped offering mortgage loans on fractional purchases, Kaplan said, so today’s buyer must be willing and able to pay cash.
“It’s not an easy product to sell,” she said. “It’s a niche market.”
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- Fractional Ownership Houses For Sale Are Luxury Living Without The Cost (holidaystospain.wordpress.com)
- Private Residence Clubs: Anyone Still Buying In? (bucks.blogs.nytimes.com)
- Vacation-home market faces long road to recovery (usatoday.com)
- Your Vacation Home and Your Tax Return (turbotax.intuit.com)
- Timeshare Recovery Companies Pose Threat (helptimeshare.com)