Soon after Bob and Delores Wardwell finished paying off the mortgage on their home in Ellicott City in November 2001, they came to a painful realization.
The tax break they earned with a mortgage was gone.
"That's when we decided that we'd be better off buying a second home," said Delores Wardwell. They settled on a cozy duplex priced at $190,000 near Bethany Beach, Del.
The Wardwells are part of a new wave of consumers helping to make a hot real estate market even better by investing in vacation homes. On the East Coast and across the nation, the value of second homes is rising so quickly that they have become an alternative for people who never would have considered the option.
Experts attribute the trend partly to a weak stock market that has pushed people to find new places for their investments. The result: Baltimoreans who for years have rented homes in resort communities in Maryland and Delaware are looking for places to call their own.
Tourism officials in places such as Ocean City and Bethany Beach, Del., know that that at least one in five visitors to their shores hails from Baltimore. The demographics for second-home buyers mirror those of visitors, according to real estate agencies.
"This is Baltimore's playground. They vacation here, and now this is where they choose to buy a home," said Liz Kaine-Bowlen, advertising director at Moore, Warfield & Glick Inc. in Ocean City.
Kevin Michno, president of the Baltimore-based Mercantile Mortgage Corp. LLC, said Baltimoreans previously looked to the Carolinas and Florida to purchase vacation homes. But recent events, including last year's terrorist attacks, have prompted many to consider areas closer to home, he said.
Driving vs. flying
"Families are looking to buy second homes they can drive to vs. fly to," he said. "That makes the Ocean City market, as well as Bethany Beach, Rehoboth Beach and Lewes, very attractive."
Nationally, the second-home market is booming. Prices and sales volumes in the market for vacation properties are outpacing the figures in other sectors of the general housing market.
A recent survey of the National Association of Realtors found that the median price of a second property rose nearly 27 percent between 1999 and last year, compared with a 7 percent to 8 percent increase in the primary home market.
Sellers in Baltimore's vacation destinations fared better.
In Delaware's Sussex County, the value of waterfront properties almost doubled during that period. The county saw an average increase of 30 percent, said Pat Campbell-White of Re/Max Realty in Rehoboth Beach. Land value appreciation in Ocean City, with its abundance of oceanfront condos, was closer to 50 percent for waterfront properties, according to agents.
Sale prices last year jumped in places such as Sea Colony, an unincorporated community of 2,200 cottages, duplexes and high-rise apartments south of Bethany Beach. An 800-foot, two-bedroom cottage, across the highway from the ocean, that sold for $119,000 last year sold for $217,000 this year.
Sales at Sea Colony have increased from $50 million in 1999 to $118 million this year.
"We've seen a change in the buyers as well. They're much more sophisticated and serious," said Ann Baker, sales director.
Future of trend
The trend is likely to continue since 34 percent of those who bought a primary home during the past two years said they likely would purchase an additional house because of the stock market's 2-year-long flop. Also, the National Association of Realtors survey found that more people are cashing in stocks or taking equity out of their homes to take advantage of the lowest interest rates in 40 years.
"Clearly, recent buyers were more motivated by a desire to diversify portfolio assets," said Dennis Hanlon, chairman of the trade group's resort forum.
The study found that one in seven buyers used equity in stocks and bonds to fund their second-home purchases. Before 2000, only 7 percent dipped into their other assets to buy additional residences.
Second-home buyers don't necessarily make six-figure salaries, either. The survey found that the typical second-home owner is 61 years old with an annual household income of $76,900. About 85 percent are married.
Thirds and fourths
Second-home buyers also are purchasing third and fourth beach homes.
That's the case with Karen Scheldt, 53, whose attraction to Ocean City started when she was a child in Baltimore and drove to the Shore for vacation.
During the late 1980s, she bought a two-bedroom condo in Fenwick Island, near the Maryland border, for $62,500. A year ago, she and her husband, Joe Scheldt, 54, purchased a two-bedroom, ocean-view condo for $150,000.
Their plan is to rent out the first property while enjoying the newest for themselves. The Realtors survey found that one in four buyers said they bought another house purely as an investment.