With lakeshore and vacation properties in high demand, prices are soaring, and cash is king
From lakeside cabins to deep-woods hunter’s hovels, generations of Minnesotans have enjoyed rest and recreation at their own privately-owned vacation homes. Today, there are more than 135,000 non-commercial seasonal recreational properties in the state, and developers can’t build them fast enough to meet the demand. For insights into the bustling vacation-home market, we talked with two Realtors® who specialize in second homes.
Serving a large territory extending from the Twin Cities’ eastern suburbs to western Wisconsin as far as Hayward and Grantsburg, Lana Cook has seen a dramatic spike in vacation-home sales. To better serve the unique needs of these clients, she earned a Resort and Second-Home Property Specialist (RSPS) certification last year.
“My RSPS has really helped with defining what matters to vacation buyers,” said Cook, explaining that classes for the certification helped her more deeply understand the different aspects of the recreation and lifestyle market, from tax structures for vacation and second homes to real estate investment.
“Of course, a lot of that has changed over the past year,” said Cook, who has been a Realtor® since 2004. “Today’s buyers want and need more from a second home than they did before the pandemic.” In the past, her typical clients wanted get-away homes where they spent anywhere from a few weeks to four months a year. Proximity to a lake was prime, and it had to be a top spot for fishing, swimming, and recreation.
“It was important for clients to know if there were crappies, walleye or muskies. Is it a good lake for water skiing and kayaking? Is it a nice flat lot? The home itself was almost a secondary consideration,” Cook said.
That paradigm turned upside-down during the long months of lockdown and isolation. Untethered from commuting to offices, droves of prospective buyers dreamed of taking their Zoom calls with a lakeside view—365 days a year. Suddenly, Cook’s clients were looking for vacation homes that could become year-round residences.
“The lake’s still important, but it’s no longer the main attraction. Now my clients want to know if that uninsulated cabin can be converted into a four-season home,” Cook observed. “They plan to work from there, so it’s got to have internet options. They want to know about the schools and amenities in the nearby towns: shopping, restaurants, and healthcare. Things that don’t matter when you’re just visiting a few weeks a year become critical.”
Farther north in the Brainerd lakes area, Kathleen Lordbock, an RSPS-certified Realtor®, sees a similar dynamic at play.
“Second home buyers are generally coming from the larger density metro areas of Minnesota and out of state,” Lordbock said. “They want peace, quiet, and privacy. Fiber-optics are often cited as a must-have no matter where the property is located.”
As demand for lakeshore real estate increases, bidding wars have escalated. Cook says she has seen offers on desirable lake properties rocket $76,000 to $100,000 over the list price.
“It’s not uncommon to have 75-plus showings on a lake home before sellers cut them off,” she said. “The majority of those may be cash with no contingencies. That makes it much tougher to compete.”
Frenzied buyers are also making concessions that would have been unheard of a little over a year ago.
“If you want a lovely home on a larger lake with a sandy shoreline and privacy, you will need to make quick decisions and be prepared to pay a much higher competitive cost,” said Lordbock. She added that many buyers competing for these properties are waiving contingencies, adding an escalation clause and writing an offer sight unseen.
For context, Lordbock noted that as recently as 2018, there was an average 10-month supply of waterfront homes in Crow Wing, Aitkin, Cass and Morrison Counties. Market reports for the area show that since 2020, the median sales price for waterfront property rose 27% for Aikin County, 17% for Cass County, 15% for Crow Wing County and 6.3% for Morrison County.
“Today there is an average of a two-month supply. And home prices are continuing to rise,” she said.
Although this environment can be disheartening to buyers—especially those who lack deep pockets— Cook urges clients who rely on financing to stay in the game.
“It may take longer and we’ll write several offers,” she says, “but when these buyers network and stay engaged, we can get creative and find their spot on the lake.” Cook noted she recently helped four buyers purchase vacation homes with financing.
Ultimately, Cook believes that something deeper is at play behind the vacation-home boom than the prospect of telecommuting from the end of a dock.
“This past year was very hard for a lot of people. They’ve had awakenings. They know that life is precious and short,” Cook mused. “What better way to spend your days than in a beautiful place surrounded by the people you love?”
Minnesota Counties Make the List of Hottest Vacation Home Markets
The National Association of Realtors® has recently released its 2021 Vacation Home Counties Report.
“Vacation homes are a hot commodity at the moment,” says Lawrence Yun, NAR’s chief economist. “With many businesses and employers still extending an option to work remotely to workers, vacation housing, and second homes will remain a popular choice among buyers.”
“The enduring opportunity for remote work will continue to raise the already high demand for property in these counties, particularly in those counties with reliable broadband internet service,” Yun says.
Below are some highlights:
- 53% of vacation home sales were all-cash
- 21% of vacation home buyers purchased a condo/co-op
- Lake of the Woods, Cook, and Aitkin Counties were among the top 30 largest vacation home counties by share of homes for seasonal/recreational use to housing stock as of 2019
- Itasca County ranks 26th in the top vacation home counties in 2020 (putting it in the top 1%!)
- Pope County ranks 32nd
- Cass County ranks 46th
- Crow Wing County ranks 63rd
- Pine County ranks 67th
- Aitkin Country ranks 76th
- Todd County ranks 85th
Read the full report here.