Vacation Markets Are Underperforming

Vacation markets have yet to recover fully from the boom and bust cycles that hit, starting in 2006. Since 2010, the highest-density markets underperformed every year but one.

According to new analysis from senior Zillow economist Aaron Terrazas, "ZIP codes where vacation homes are 10 percent or more of the market saw home value appreciation 0.7 percent slower than other nearby ZIP codes with fewer vacation homes in 2017." Terrazas adds that vacation markets underperformed in all major areas of the nation during the housing recovery between 2012 and 2017. On the other hand, Midwestern vacation markets continue to outperform the overall market.

During the housing boom years from 2000 through the peak of the housing market in 2006, home values in vacation markets increased 117 percent, compared to an increase of 83 percent in markets with the fewest vacation homes. But what goes up often comes down, and during the housing bust years from 2006 through 2012, home values in vacation markets fell 35 percent compared to a 26 percent drop in markets with the fewest vacation homes.

Read more