Palm Springs is ranked the eighth best market in the U.S. to buy a vacation home in 2020 based on the top 25 best places compiled by Vacasa, the largest full-service vacation rental management company in North America.
Big Sky in Montana took the top spot with an annual gross rental income of nearly $80,000, a median home price of $541,842, and a cap rate of 9.2. To calculate the average cap rate, Vacasa considered the averages of the following in each market: property taxes, utilities, HOA fees, insurance, and property management fees.
Cape Hatteras in North Carolina earned second with $63,00 in annual gross rental revenue, a median home price of $379,248, and a cap rate of 7.6 percent. The Poconos in Pennsylvania ranked third with $38,079 in annual gross rental revenue, a median home price of $20,190, and a cap rate of 8.2 percent.
Palm Springs netted $51,483 in annual gross rental income, a median home price of $459,857, and a cap rate of 6.4 percent. Here is Vacasa’s description of Palm Springs:
“There’s just something different about Palm Springs. When arriving in town, you instantly feel as if you were transported to a simpler—but more subtly glamorous—time. While the area’s shopping, dining, swimming, and sightseeing keep guests busy, there’s nothing better than lounging outside a private vacation home and soaking up the sun by the pool. The skyline in Palm Springs will tell you something about the area, as most homes (vacation or otherwise) rarely rise above one story. The expansive outdoor areas lined with outdoor seating, hot tubs, and barbecues make up for any lack of indoor square footage.”
Big Bear (15th) and Mammoth Lakes (22nd) from California were also ranked in the top 25. Colorado had the most cities ranked with four followed by California with three and two each for Florida, Hawaii, Georgia, and North Carolina.
Some of the factors influencing vacation home purchases include interest rates that have plummeted as a result of COVID-19 and other economic drivers. Mortgage rates on primary residences and second homes have hit all-time lows, and are currently being offered between 2 percent and 3.5 percent, depending on the lender. This, combined with employers encouraging their staff to work remotely as a result of the pandemic, has driven strong interest in vacation rentals.
“We’ve seen a surge in demand for vacation homes across our portfolio, and real estate transactions are up as much as 35% in some of our vacation rental markets across the country when compared to July 2019,” says Shaun Greer, Vacasa’s vice president of sales and marketing. “Many buyers believe we will be impacted by COVID-19 for the next 12 to 18 months, and are seeking a place close to home where they can get away with their families, work remotely if needed, and generate income when the home is not in use.”
Several markets from the 2019 Top 25 Best Places to Buy a Vacation Home report have once again ranked, including Big Sky, Montana, Killington, Vermont, Kissimmee, Florida, and Dauphin Island, Alabama, among others. This year’s list reflects markets where single-family homes are the primary inventory type and opportunities for outdoor adventure are abundant. These consumer preferences have introduced several new markets to the list, and subsequently eliminated some popular vacation rental destinations.