Second homes gaining ground as investments

Glenn and Kristine Quirk once had difficulty scraping together enough for a down payment on one home. But in just two years, the Burbank couple have practically become land barons, having recently closed escrow on their fifth vacation property in Big Bear.

Glenn, 40, a golf course superintendent, started with the idea of forming an investment club with friends to analyze and invest in stocks and bonds. But the group didn’t get off the ground until its members changed their focus to real estate.

“That’s our whole strategy,” said Kristine, 32, a senior marketing manager with Union Bank, “to not have to invest in the stock market.”

Like the Quirks, others also are investing in second homes in the Southern California mountains and desert.

“A lot of money that was going into the stock market is now going into real estate,” said Christopher Cagan, director of research and analysis at First American Real Estate Solutions of Anaheim. “There’s a lot more of an interest in investors moving away from a piece of paper and into hard assets. People want something they can live in.”

According to DataQuick Information Services, a La Jolla-based real estate research firm, the median price for a vacation home in Southern California this summer was $198,000, up 21.6% in July from July a year ago. Compare that to the stock market indexes that have plunged this year in the wake of a number of corporate scandals: the Standard & Poor’s 500 index down 23.12%, year to date; the Dow Jones industrial average, down 17.01%; and the Nasdaq composite index, down 33.41%.

Add to the mix the lowest interest rates this generation has seen and a strong primary real estate market nationwide and you’ve got a second-home market that many say appears to be unstoppable.

“Right now there is no other investment out there like real estate,” said John Karevoll, a DataQuick analyst.

Are the Quirks and their friends worried about the so-called housing bubble bursting? Right now, they are just enjoying the ride. But Kristine Quirk said she knows the Southern California market can be fickle, although she’s optimistic.

“If [the market] does burst,” she said, “I know it will bounce back again, even higher.”

So far, their plans have paid off. Last month, the group’s first Big Bear property -- a 1,000-square-foot, two-bedroom, two-bath residence purchased two years ago for $90,000 -- was re-appraised at $145,000, a 61% appreciation rate.

“All of a sudden,” Kristine said, “there was enough equity to buy more.”

Soon after, the group made down payments on three more Big Bear area properties ranging from $75,000 to $94,500, which they rent out year-round, except for one, which they hold for personal use during the summer. Kristine and Glenn even decided to branch out on their own and buy a fifth property for $89,000 with Kristine’s mother and two sisters.

“We are very optimistic about Big Bear,” Kristine said. “We think it’s a gold mine.”

Much of the Southern California vacation home market, according to analysts, is being driven by baby boomers who are not only looking for an investment but also hope to reconnect, or “cocoon,” with family.

Among those planning for retirement, many from Northern California and the Pacific Northwest are looking at desert properties. But more Southern Californians are choosing the mountains for second homes.

“People are just not willing to fly after 9/11,” said Mike Dolan, owner of Prudential Properties of Big Bear and a real estate agent for 23 years. Instead, he said, Big Bear buyers are looking for quick and safe weekend getaways.

“This is a quality-of-life issue,” he said. “Instead of talking about a stock portfolio at a cocktail party, [they] can enjoy their investment instead.”

One such buyer is 64-year-old Patrick Morris, a Superior Court judge from San Bernardino.

Morris and his wife, Sally, 62, recently closed on a $194,000, 1,800-square-foot, three-bedroom, two-bath house in Running Springs, about 15 miles from Big Bear and minutes from Lake Arrowhead. The Morrises, who have owned other vacation property in the Mojave Desert, had been looking for another property closer to home to enjoy with their children and grandchildren.

“The stock market is bad,” said the Morris’ daughter, Katie Willis, 36, “but this is both an emotional and financial investment for my dad.”

Already, family members have nicknamed their new vacation home “The Treehouse” because of its lofty location in the pines and 180-degree view.

“I hope this piece of property will stay in our family for many years to come, long past my and my wife’s time,” Morris said. “It will be a special unifying location for our family.”

Other recent buyers are just beginning their own family traditions with vacation homes.

Poor stock performance, low interest rates and the birth of a baby helped 30-year-old Bob Anderson of Cypress decide the timing was right to buy a $182,000 second home in Big Bear.

“With interest rates where they are, we decided to pull the trigger.... [My wife and I] both have stocks, but we don’t look at them right now.”

Besides, he said, “I always wanted a place to hang out, have a cup of coffee and look at the snow ... and we wanted to have a place for our child to enjoy as well.”

Although Bob and his wife, Pam, 31, said they paid more for their vacation home than they did for their house in Cypress in 1996, they still feel they got a good deal.

“I know in general the market has been high,” Bob said. “But I think over the long term it will [continue to] go up.”

Although much of the second-home market activity has been in the mountains of Southern California, residences in the Palm Springs-Palm Desert area have also done well this year, especially after last year’s poor sales. According to the California Assn. of Realtors, sales in the desert were down 14.9% in 2001 compared with 2000, while the median price there was up 20.7%.

“We are noticing a lot of activity,” said Scott Gerrie, president of the California Desert Assn. of Realtors. “This [past] summer was busier than most.”

According to the association, compared with last year, the median price for a residence in Palm Springs was up 25.75% to $210,000 as of August and up 15.95% in Palm Desert. Sales of single-family houses and condos, analysts say, were also up in double digits across the Coachella Valley.

“[Buying real estate] sounded like a much better deal than getting 2% on my CDs,” said Victor Slayman, 80, of Porterville, Calif., who along with wife, Lucille, 78, recently closed on a $255,000 home in Palm Desert. The Slaymans had visited the desert from their Northern California home for 10 years and were looking not only for a solid investment but also for a place to relax.

Although they plan to rent out the property during the winter months, for now, Victor said, they just want to enjoy their desert home themselves, right next to the green on the 14th hole.

“It’s a great spot to just watch the golfers,” Victor said.

Another recent buyer is Woodland Hills resident Stan Jolley, who bought his first vacation home in Rancho Mirage 22 years ago. Jolley, 76, recently closed on two more properties in Rancho Mirage; one for $299,000 for his children and grandchildren to enjoy and the other a $208,000 fixer he remodeled for a fast resale.

“We stole that one. It was really good timing,” he said. “We’ve already put it back on the market for $285,000.”

With the desert’s low inventory, which has spurred multiple offers above the listing prices in some cases, even the mountain-loving Quirks are considering investing there.

“I don’t want to put all of our eggs in one basket,” Kristine said. “But I think it might be time to diversify a bit. Recently, we’ve started thinking about the desert.”

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Allison B. Cohen is a Los Angeles freelance writer.