When your vacation home is the first you buy

Lillie Walsh Dudley and Andy Dudley wanted to own. The couple, who have a 5-year-old son, had been renting since 2014 in the South Slope neighborhood of the New York borough of Brooklyn. They started looking for something to buy about three years ago.

“Even though we’re not rolling in cash, we had a bit of savings,” said Lillie Walsh Dudley, 41, who works in book publishing, as does Andy Dudley, 45. Still, not enough to buy in Brooklyn. “All we could afford would be a stretch and downgrade of our tenancy.”

Then the pandemic hit, and their apartment suddenly felt small and the city itself felt claustrophobic. The couple decided to try another house hunt.

This time, instead of looking at Brooklyn, they looked further – much further. Their plan: keep their rental and buy a second home about three hours away in the Catskills. In August 2020, they paid $221,000 for a move-in ready century home in Roxbury, New York.

A growing number of first-time buyers are doing what the Dudleys did: buying a second home while renting out their primary residence. Although there is no data to track this trend, real estate agents and industry watchers say that a combination of rapidly rising house prices and the flexibility of working from home in times of pandemic has prompted some hopeful homeowners to skip the first step — owning a primary residence — and go straight to buying a second home somewhere more affordable.

Vacation home purchases in general have exploded during the pandemic. In 2020, vacation home loan applications increased by 30% compared to 2019, according to the latest available data from the Home Mortgage Disclosure Act. Zillow, a real estate website, looked at homes for sale in vacation and weekend destinations, and in January 2019, a quarter of those markets had more page views per home than typical markets. By January 2022, half of them had done so.

Home ownership across the country has dropped dramatically. In 2009, newcomers made up 45% of the home buying market, but as of January 2022, they make up just 27%, according to the National Association of Realtors. And with median home prices up 13.7% from a year ago, the challenges multiply.

Some beginners get creative. Virginia Alber-Glanstaetten, 51, and Becky Goodman, 35, who are tenants in Brooklyn’s Dumbo neighborhood, said COVID-era lifestyle changes, including remote working, had them enticed to buy their first home together near Provincetown, Massachusetts, where they have vacationed for years. Their $800,000 budget for a primary residence wouldn’t have given them much more space than they already had in Brooklyn, they said. But on Cape Cod, where they bought, there were more options in their budget, which was around $600,000 after setting aside enough to keep paying rent in Brooklyn.

In March 2021, they paid $605,000 for a 220-year-old repairman on 1.3 acres in North Truro, Massachusetts. “Everyone in my family thought I was crazy and that was the backslidden way of doing things,” Goodman said.

The house they purchased had long since been converted from one family into three separate units, which was part of the appeal. The couple plan to stay in one of the units while renting out the others as investment income. With their jobs still partially distant, they spent weeks on Cape Cod, while keeping their rental as a home base closer to friends and work.

“The Cape Cod house has become this really beautiful escape,” Goodman said. “And we love having our resident footprint here in the city and doing the things that we love here.”

Dylan Beaumont, 33, who owns a house in the Catskills and rents in Manhattan, put it this way: “If I’m here for a week or a week and a half, it’s like, ‘I want to go to town and get Thai food and see friends,” he said. “Then you get bored of the city, and you come here and hike.” He and his fiancée, Susanah Zeffiro, 32, bought in Margaretville, New York, in August 2020, deviating from their original pre-pandemic plan to buy a place in the city.

They paid $565,000 for the Catskills home and spent more time there than they initially thought, with the protracted nature of the pandemic. Beaumont and Zeffiro’s jobs in advertising are still partially remote, but they often have to meet clients in town or travel for work. “I love the balance,” Beaumont said.

Although the cost of shopping in a rural area may be significantly lower than in the city, the pandemic shopping frenzy has resulted in fierce competition. Last year, first-time buyers Anna Lewkowska and Alex McKean purchased a second home in Yucca Valley, California, near Joshua Tree National Park. They bid on three different homes before landing the winning bid on a two-bedroom, 1½-bathroom home with about 2,000 square feet and sweeping views. They paid $517,000, more than $120,000 more than the list price.

That’s still a fraction of what it would have cost them to own a home in Santa Monica, Calif., where the median price today is $1.9 million, according to Realtor.com. Lewkowska, 31, who owns a talent management company, and McKean, 32, who works in product management for a pipe manufacturing company, said they liked where they lived near the Santa Monica beach, but they knew home ownership wasn’t affordable there. “We know real estate is a great investment,” Lewkowska said. “But here in LA, it’s extremely expensive.”

They’ve spent the last year going back and forth between the two locations while renovating the Yucca Valley property, doing some of the work themselves. They’ve dubbed the home Mandarin Escape and describe the design style as “retro modern” with gold light fixtures and a ’70s-themed sunset color scheme. The plan is to rent it out on Airbnb, starting this spring . Lewkowska said they think they can charge between $250 and $1,000 a night, depending on the season. “That was the basic economy for us,” McKean said.

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