A House in the Country

A House in the Country

The neighbors don’t come to call and prices are reasonable

Ah, the vacation villa. “I enjoy here a cozier, more profound and undisturbed retirement, “ wrote Pliny the Younger of his Tuscan retreat. “I am at a greater distance from the business of the town and the interruption of troublesome clients. All is calm as composed.”

Tuscany still beckons, but so do a lot of other spots in newer worlds. Recent surveys show that Americans’ interests in owing a vacation home has tripled, but prices, which crashed in 1988, still have not recovered. The New York Times reports that prices in some places in the Northeast are still 30 percent lower than they were in 1987. Mortgage bankers note that while prices in Florida are starting to come back and California prices are stabilizing, prices in much of the West are still down. John Tuccillo, chief economist of the National Association of Realtors, notes that “although there was a brief rebound in 1994, prices are still going down on both coasts, as well as the South and West”. Only in the Midwest, Tuccillio says, have prices remained stable.

As baby boomers move into their prime earning years, prices could nudge upward. According to Mediamark Research, Inc. in New York, the median household income of families owing vacation homes is just $54,000. And another survey found that almost half of all respondents believed they had “some chance” of purchasing recreational property within the next decade. But the supply of homes is also growing and most experts doubt prices will climb above the levels of the late ‘80s anytime soon.

Davenport road and McAlpine street. Photo by Elena

Suburban sprawl is making is harder to find a perfect spot nearby. Already the average American travels over 300 miles to reach his vacation destination, and one-third of Americans travel over 500 miles. Besides, buyers are eschewing traditional summer homes for ones that can be used all years. That’s creating something of a boom in mountain areas like Taos, New Mexico, and the counties outside of Denver as action-oriented vacationers seek outdoor activities and more privacy.

Expert Tips: Uncle Sam Lends a Hand

If you rent out your vacation house 15 days or less per year, mortgage interest payments are deductible, as they are for your primary home. The rent doesn’t have to be declared as income and is tax-free.

A vacation home is classified as rental property if you rent it out for 15 or more days per year and stay in it yourself no more than 14 days or 10 percent of the total days it’s rented. All rent must be declared as income, but some of the utilities and maintenance costs can be deducted, as can losses on the building.

If you rent out your home for over 15 days but also stay in it yourself over 14 days or 10 percent of the total days it’s rented, it’s considered “mixed-use property”. But losses in excess of expenses aren’t deductible.