According to the National Association of Home Builders (NAHB), 50% of our country’s second homes can be found in just seven states, one of which is Pennsylvania. Our state is home to many second residences, and factors such as location and affluence play a large role in why. Pennsylvania is a state known for its beautiful natural landscapes, including state parks, numerous lakes, and mountains. There’s so much to do outside year-round, making it a big draw for vacationers and families gathering for weekend stays. Of course, affordability throughout much of the Commonwealth, in addition to proximity to major cities, tax incentives, and family connections, are other reasons why Pennsylvania has an influx of second homes as well as vacation homes.
Housing Supply Challenges in Pennsylvania
Despite the rise in recent years in home building market share for regions that cater more to second homes, Pennsylvania has dragged its feet in response to the housing supply issue that much of the nation also faces. According to a report from The Pew Charitable Trusts, their lack of building has contributed to the housing shortage. In fact, only six states from 2017–2023 rank worse than Pennsylvania in the issuing of permits when it comes to new home construction. The lack of new construction starts and residential permits has put a damper on affordability and has affected supply across the state.
Trends and Opportunities in the Second-Home Market
There had been a pursuit, during the pandemic, from some owners to acquire a second property, but this trend dipped slightly two years ago. Second homes account for 4.6% of the total housing stock in the United States. Those considering the second-home market in Pennsylvania should be cautiously optimistic about where it goes from here. We can only speculate, but stabilizing mortgage rates and demographic shifts, with more Millennials and Gen Z buyers entering the market, have the second-home market poised for growth. Opportunities for both buying and selling second homes are present and could increase as we enter the traditional spring/summer real estate season. What are the impetuses for seller activity? Things happen, people move, connections fade, finances change, and in the blink of an eye, owners need to list their vacation property for sale.
Four Key Factors When Selling a Vacation Home
Market Valuation
After you understand why you’re selling, whether you believe it will be financially advantageous to do so or you need to sell given your present situation, honing in on a price will be your next challenge. Some homeowners want to give it a go on their own. While there are a few circumstances where this might make sense, we do caution against attempting to sell a property, especially a second home, without the support and services of a real estate professional. Discover more about why this could be a mistake by visiting our seller FAQs.
Our approach to selling a second home examines the market conditions: locating comparable properties in the same area and taking into account the property’s appreciated value (assuming it has appreciated since it was purchased). Furthermore, it’s essential that you rely on an agent who’s familiar with your second-home market. If you live in a lake community, you need a professional with experience in that specific community. We have a unique online tool that better equips sellers to understand their home’s value. Instantly gain your property’s valuation by visiting this page of our site.
Is Now a Good Time to Sell?
It can be a mixed bag for sellers as they look to counter mortgage interest rates, which are known to be a little stubborn at times. High rates can deter a portion of the buyers who are on the fence. They want to buy but are anticipating a drop in interest rates. Some forecast models have mortgage rates falling to around 6% by the end of 2026. With that being said, if you’re contemplating waiting to see if the rates will fall, other sellers might be having similar thoughts. The more sellers that wait, the more competition there will be in the years to come, if and when the rates do fall more significantly. A more successful strategy might be this: Sellers can catch homebuyers who are reacting to incremental decreases in the rates and are ready to pounce on new listings popping up in their areas of interest.
Spring and the summer months are as good a time as any to list your vacation property for sale. In the Greater Scranton area, new contract activity has surged by 63.1% month-over-month (March as compared to February), reflecting strong demand from buyers. Spring is traditionally a strong selling season in Northeast Pennsylvania, even for our second-home markets. This increased buyer activity has continued to generate increased sales and rising prices.
Though it appears to be an opportune time to place your vacation home on the market, if you’re looking to sell, you must consult with a local real estate professional to make an informed decision. You may have more equity in this property than you realize. Homeowners have earned record amounts of equity over the past few years, and that can make all the difference if you’re selling one second home and you’re looking to purchase another investment property. Again, if you’re seeking increased buyer activity, you might need rates to decline further, increasing buyer affordability and demand. Economic factors, such as inflation, might also play a role in impacting homebuyer confidence.
Tax Implications
A downside to selling a second home or vacation property is certainly capital gains tax. While a primary residence, where you’ve lived for two of the previous five years, can provide you with a little shelter from capital gains, property owners don’t have that option with second homes. There may be deductions you can claim on your annual taxes if you’ve rented out your vacation/second home. Areas such as maintenance, utilities, depreciation, and property management may all aid with deductions. Of course, this all becomes a little trickier if you’re selling a second home, especially one that’s been an investment property as well. We highly recommend consulting your tax consultant or CPA to review your tax scenarios before selling your property. This will help you prepare for what’s ahead.
Improvements Needed?
There are a few fundamental questions homeowners need to ask themselves when deciding whether to sell their second home “as is” or make the necessary upgrades before placing it on the market. If the home’s in solid shape, repairs or updates might not be needed. If there are obvious repairs or eyesores, then it could be to your advantage to fix those problematic areas first. Whatever path you decide, you must consider a few things: Does the return on investment (ROI) justify the upgrades? Are there any repairs that, if not made, could prevent a sale from happening? Will any updates or renovations I make on the property boost its sales price?
Upgrades vs. ROI
Homeowners should be familiar with what projects will bring them the best bang for their buck. Some of the best improvements include a fresh coat of paint in the home, upgrades to lighting, landscaping, or even adding a front steel door. Smaller changes with high visual impact are a great rule of thumb!
Major Issues or Material Defects
Critical issues in the home can derail a sale faster than you can say “inspection.” And a good home inspector will uncover issues that can pose a serious threat to any occupants. If your second home has safety issues like mold, faulty wiring, or loose railings, take care of them immediately. Water issues, such as leaking pipes or a compromised roof, can also present a threat. Even if a seller decides to sell the property “as is,” they would need to disclose any known defects.
Getting a Better Price
The market will often dictate how to approach any renovations you plan to make on the property. For instance, if an owner is looking to sell their vacation home in a buyers’ market, with slower market time for sellers, some upgrades might be a good approach. Yet, if the market favors sellers and homes are moving fast, holding off on making numerous repairs might be a better tactic. While a minor bathroom or kitchen remodel or attic bedroom conversion can boost the sales price of the home, the seller needs to know that in those instances, they would very rarely recoup 100% of the renovation costs.
Final Thoughts
Listing a second home or vacation property for sale is a big decision that shouldn’t be taken lightly. Understanding its value, carefully timing the sale, weighing any tax implications, and determining if certain improvements are worth the investment can all impact the eventual outcome. Whether you’re ready to list or you’re still considering your options, thoughtful preparation with one of our real estate professionals can lead to a smoother and more profitable sale down the road. Take your time to address these important factors and make wiser decisions as they relate to your financial goals.