U.S. basks in record-breaking home sale bliss while agents in other countries struggle to find buyers

The robust housing market in America has broken records once again as the homeownership rate rose to an all-time high of 69.2 percent and sales of existing single-family homes rose 2.1 percent in June to a [seasonally adjusted annual rate] of 6.95 million units.

But while real estate agents in the U.S. are enjoying the wealth of business, agents in Australia are struggling to keep up their sale numbers as hesitant Aussie buyers wait to see how the market pendulum swings. Home loan affordability declined across Australia in the first quarter of 2004 to its lowest level in 13 years, according to the Real Estate Institute of Australia.

Some agents in the U.S. are grumbling that the healthy market has made them too busy. If you're feeling overwhelmed by today's hot market, consider what agents and homebuilders in Australia are going through to drum up new business. Many have resorted to offering a range of incentives and strategies to attract buyers such as discounts, free air conditioning units, chocolates and chauffeur service to and from prospective homes.

Pablo Moray, an agent for Starr Partners in Wetherill Park recently told The Daily Telegraph his staff is putting in long hours dealing with hard-nosed buyers who are trying to beat the prices down. Often agents like Moray cold call renters and try to persuade them into buying a home.

Homebuilder Bellevale Homes offers to pay deposits of up to $20,000 for anyone buying in the Warnervale/Blue Haven area of Australia’s Central Coast, The Daily Telegraph reports. The company also implemented a "home-to-home loan" that allows a buyer to move to their new property without requiring them to make any payments until they sell their previous home.

Australia isn’t the only country to experience a slow-down in spite of the thriving U.S. market. Farther north in the United Kingdom, the number of homebuyers on the books fell 13.6 percent in April, according to a survey by the UK’s National Association of Estate Agents. Further, new applicant inquiries fell 24.1 percent during March, April and May.

UK buyers are reluctant to commit to a market they fear may be slowing, theorizes Richard Hair, president of NAEA. But many agents say the sluggish UK market is due to the rise in interest rates and home prices over the past few months.

The Netherlands will also likely face a housing market crisis as the boom dies down, fueled by the combination of over-priced properties and high household debt. Homes in the Netherlands are overvalued by some 20 percent, according to a study by the Dutch central bank, De Nederlandsche Bank. In fact, average prices in Amsterdam have jumped from US $65,000 in 1985 to US $270,000 in 2002. As home prices rose and demand went up, homeowners began taking out additional loans based on home equity, putting the money into home improvements, entertainment, vacations, and durable goods.

More Americans buying second homes—which can mean twice the business for agents

Fueled by low mortgage rates, alternative loan programs and baby boomers in their peak-earnings years, the second home market is experiencing a boom of its own, according to the National Association of REALTORS®.

In fact, the second-home market, which includes vacation homes and investment property, now makes up about 5-6 percent of all homes sold each year.

Why buy two?
For many buyers, the second home is their "vacation villa on the beach" fantasy come true. For others, it's purchased with the idea of making it a permanent residence after retirement. And some look at a second home purchase as a means of diversifying their investment portfolio.

America’s hankering for second home purchases came after tax law changes in 1997, which permitted sellers to exclude up to $500,000 in capital gains from taxation (for a couple who live in that home for two out of five years). The tax law changes allowed many homeowners to buy another, smaller primary residence and use some of their home equity to purchase a second home.

And where are they going? Those baby boomers—who represent 29 percent of the U.S. population—are igniting demand for homes near beaches, lakes, ski areas, golf courses and spurring the growth in popularity of elaborate adult resort communities.

In fact, some companies have begun to specialize in these types of properties such as Centex Destination Properties, the second home/resort division of Centex Homes. The company develops residential resorts and condominium/town home facilities specially geared to the vacation home market in prime areas like Hawaii, Las Vegas and on the Texas and Florida coasts.

What to tell your customers
The cost of maintaining a second home is often very similar to the buyer's primary residence with the mortgage payment, property tax and insurance as the main expenses. However, for a second home, buyers may be required to have a larger down payment when securing a mortgage and the cost of insurance may be higher since it is not used as a primary residence.

Second home owners may also incur added expenses to provide for management, security, and handling of any emergencies in their absence. Storm damage for the coastal homes or frozen plumbing in the mountain homes will add costs and logistic issues for the owner who lives a distance away.

If the home is for rental or investment purposes, the homeowner cannot use the second home for personal use more than 14 days or 10 percent of the total days rented to others, (whichever is greater) if he wants the home to be considered an investment property with all expenses and depreciation eligible for deduction.

If the home is rented out for less than 15 days, the homeowner does not need to report the rent as income, nor does he deduct any of the expenses. Experts say that if the home is rented for more than 15 days, the rental income is subject to taxation and some expenses can be deducted.