Video: Second-home boom ready to burst?

NBC News with Brian Williams
By Kevin Tibbles Correspondent
NBC News
updated 6/1/2005 7:37:51 PM ET 2005-06-01T23:37:51

For the Rhodes family, a bike ride near their home in Eagle County, Colo., is welcome quality time.  But this isn't their real home; it's their second — purchased as a long-term investment.

“It's something that you can actually see, touch, feel, use,” says Jeff Rhodes, “instead of investing in the stock market; that is kind of abstract.”

The Rhodeses aren't alone.  Second homes accounted for a record 36 percent of all home purchases last year — 23 percent were investments.

But how do you know it's a good deal? How do you value something?

Many are joining investment clubs that focus on real estate.  Rebecca Katzen belongs to one in Long Beach, Calif.  "My tax guy has been bugging me,” says Katzen. “You know, real estate is where it's at!"

But before laying out your savings, financial advisers warn that second homes don't generate income immediately.  In the short term, says Steven Ricchiuto, chief U.S. economist for the global banking group ABN-Amro, they cost.

“There are real estate taxes attached to it.  There's general maintenance and upkeep attached to it.  And therefore," says Ricchiuto, “it becomes a bigger strain.”

Investment purposes aside, the second-home industry has spun off an employment boom.  Here in Eagle County, 45 percent of the area's 34,000 jobs are tied to second homes.  That's more than even the tourist trade.

For Brook Burgee, with the team at Lights On, a custom concierge service for second-home owners in Vail, Colo., business is brisk.

“We picked up seven new homeowner contracts in one week, and our goal was to pick up five per month!” says Burgee.

Jodi Link, also of Lights On, says they’ll do the cleaning and shopping, turn on the lights and even book activities for the kids. Plus, she says, “We can have dinner on the table when they show up.”

But Ricchiuto warns that popular areas could wind up as “second-home ghost towns” if the bubble bursts.“You're not necessarily going to sell the house where your children go to school, and you’re entrenched in a community, says Ricchiuto. “You sell the secondary house first.”

So far, though, for the Rhodes family, it’s “Home, sweet second home.”

“It is absolutely tremendous,” says Patty Rhodes. “I mean, we would be different people as a family if we didn’t have this place.”

It’s an investment that pays the Rhodeses dividends worth more than just money.

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