Wind Point Lighthouse. Racine is now on the Chicago area’s vacation-home radar.
Tribune file photo by John Smierciak Bill Thorsness had been looking for a second home for five years. When he and his family found the perfect one — a four-bedroom house in the Indiana lakeshore town of Dune Acres — he wasn’t going to let the slumping real estate market stop him.
To Thorsness, partner in the Oak Brook law firm of Lillig & Thorsness Ltd., the sluggish residential market proved a bonus.
“I am fortunate that we didn’t buy a second home too early, that it did take us as long as it did to find one,” Thorsness said. “When the real estate market was booming, I think we would have paid too much. I think people will begin paying too much again once this lull ends. We picked just the right time to buy this home.”
Thorsness isn’t alone. Local real estate pros say their vacation-home sales are steady, traffic is brisk in traditional destinations, and the boundaries of second-home territory are on the move. This is despite the well-recorded slowdown in residential real estate across the country and locally.
The National Association of Realtors reported that existing-home sales nationally were down 8.4 percent in March. In the Chicago area, sales plummeted 22.1 percent.
Such numbers would seem to mean trouble for sales of second and vacation homes, which have dipped from their previous highs but not as much as such a sluggish market would suggest.
“The second-home market is completely different than the market for primary homes,” said Irene Jarosz, a real estate agent with the Libertyville office of Baird & Warner who sells second homes in the Chain-O-Lakes area, just south of the Illinois-Wisconsin border in Lake County. “These are people who want to play. They want to party. It’s people who want to swim and water ski. These are not people who are purchasing because they need to; they are purchasing because they want to. These people are going to buy even if the residential market is slowing.”
Donna Hofmann, a real estate agent with the Chesterton, Ind., office of Coldwell Banker Residential Brokerage, has been selling vacation homes to Chicago-area residents for years. These buyers purchase homes from Ogden Dunes to Long Beach, Indiana resort towns dotting Lake Michigan.
This year, she expects second-home sales — of which 95 percent are to Chicago-area buyers — to again make up a good portion of her business.
“We have slowed down a bit,” Hofmann said. “We are seeing some more cautious buyers. But I think most buyers also realize that the Indiana prices are still a very good value for a vacation home. We are slower, but we are still steady when it comes to second-home sales.”
Prices of second homes in Indiana have also remained steady, Hofmann said. In Ogden Dunes, the Indiana resort town closest to Chicago, the average second home fetches near $350,000, she said. In Dune Acres, vacation homes sell for an average of about $700,000, with those closest to the beach selling for much more.
Though Hofmann expects her second-home sales to remain strong, she says she won’t sell as many as she did at the height of the residential boom.
“The vacation home is an elective. It’s not something that people absolutely have to have,” Hofmann said. “Everyone in the world has seen the news that the residential real estate market has slowed. Buyers, then, are being very cautious before making an offer. They realize that homes aren’t selling as well, so they are taking more time. Most are looking from one end of the lake to the other before making a decision.”
The second-home market, though, does have a built-in advantage: Buyers don’t necessarily worry as much about the strength of the real estate market as do those of primary residences.
At least that’s what John Livingston, an agent with the Roscoe Village office of Century 21 Sussex & Reilly, has found. Livingston does a brisk business selling second homes in southwest Michigan, specifically in the Lake Michigan community of Hagar Shores, north of such popular areas as Union Pier and New Buffalo.
“It’s all supply and demand,” he said. “There are so many second homes in places like New Buffalo and Union Pier, and there is enough demand for them that the market keeps moving north. New Buffalo has gotten pricier. Now, for value, Chicago residents are moving a little more north. My clients don’t want to get hung up in all the activity going on around New Buffalo. They want something a little quieter.”
Many of Livingston’s clients have long sought a second home but question spending $400,000 or more on a two-bedroom condominium in Chicago, the agent said. Instead, they can go to an area such as Hagar Shores and purchase a three-bedroom, two-bath vacation house close to the lake for $500,000.
Livingston expects the second-home market to remain strong this year and then gain more traction. The reason? The Baby Boomers are coming.
“We’re seeing Baby Boomers retiring, becoming empty nesters,” Livingston said. “You can bet that they’ll be looking for vacation homes.”
The second-home market is busy, too, in Wisconsin, said Judy Hearst, vice president and regional manager for Coldwell Banker Residential Brokerage’s Milwaukee metro region.
“I can’t say this market started back with the Chicago Fire, but it seems like people from Chicago have been buying second homes in places like Lake Geneva for that long,” Hearst said.
Traditional hotspots such as Lake Geneva remain strong, Hearst said. But buyers are now investing in less well-known areas, such as Racine, a town along Lake Michigan that features museums, sporting events, restaurants and a busy harbor. Racine is about 60 miles north of Chicago.
Hearst, like Livingston, is waiting for the next big surge in second-home buyers.
“The second-home market goes through cycles,” she said. “Last year, about 30 percent of all the purchases in our region were second-home sales. As the next wave of Baby Boomers becomes 50 or 52, it’s projected again that next year we’ll see another, larger wave of second-home purchases. That Baby Boom age group wants quality of life. They know how to enjoy life.”
Buyers don’t even have to leave Illinois. Holly Blanchette, an agent with RE/MAX Grand in Ingleside, says that 15 to 25 percent of her business every year comes from second-home purchases in the Chain-O-Lakes area in Lake County.
Chicago-area residents usually pay from $500,000 to $700,000 for a typical vacation home in the region, Blanchette said.
Like other agents, Blanchette has seen a slight slowdown. The vacation-home market in the region, though, remains strong, she said.
“I think the whole housing market is coming back into a normalized market,” she said. “People were putting their homes on the market and getting multiple offers. That’s not happening today. With second homes there isn’t the same urgency as you have with primary residences. People don’t have to buy a second home. That’s why we are seeing people being picky. They’re still buying, they’re just taking more time.”
Joe Campise, a mortgage loan officer who lives in Chicago’s Peterson Park neighborhood, in March purchased a second home in Hagar Shores. The renovated two-bedroom cottage sits on a double lot on a wooded patch of land.
Campise at first sought a second home in the Union Pier and New Buffalo areas. Anything even close to Lake Michigan soared out of his range. Hagar Shores offered an alternative.
“My house is a quarter-of-a-block away from the lake,” Campise said. “You can walk to it in a minute. I went to Hagar Shores one weekend, put in an offer and bought it. It’s just the perfect little place.”
Campise says he wasn’t concerned about the strength, or lack of it, of the local residential market when purchasing his home. Real estate is cyclical, he says. He’s confident that his home will be a strong investment.
“Any property you buy, you look at it as an investment that will appreciate,” Campise said. “But it is a second home, not a primary residence, so there is also the enjoyment factor to consider. I’ll be using it as much as I can, every weekend.”
