SATURDAY, MARCH 2, 2013
America’s Best Retreats
By STEVEN M. SEARS, CRYSTAL KIM, SANDRA WARD, AND JONATHAN R. LAING
Second-home prices surged in late 2012, particularly in low-tax states. Penta’s 20: Jackson Hole, Wyo.; Palm Beach, Fla.; Hanalei, Hawaii (Kauai); Park City, Utah; North Lake Tahoe, Calif.; Mount Desert Island, Maine; Austin, Texas; Aspen, Colo.; Wailea, Hawaii; Lake Geneva, Wis.; Vail, Colo.; Brays Island Plantation, S.C.; Martha’s Vineyard, Mass.; Scottsdale, Ariz.; Palm Springs, Calif.; Kiawah Island, S.C.,; Hamptons, N.Y.; Sun Valley, Idaho; Pebble Beach, Calif.; Sea Island, Ga.
The law of unintended consequences has struck the second-home market. Increase taxes on the wealthiest Americans, and second-home prices jump. That’s what we’ve discovered during our annual review of the second-home market. Buyers fleeing high-tax states are snapping up properties in states with less onerous tax burdens, animated by the dictum uttered by Judge Learned Hand, who famously stated that Americans have the right to construct their affairs to produce the lowest possible tax burdens.
Some second-home enclaves are, in short, morphing into domestic tax havens, with sales of multimillion dollar homes in states without income taxes increasing considerably in late 2012. The big winners were Wyoming, Nevada, Florida, and Texas; real-estate agents tell Penta the trend is carrying briskly into the current year. Conversely, it’s interesting to note that the few resorts registering price falls last year included the Hamptons and Pebble Beach in high-tax New York and California, respectively. Homes in the right tax locations that once might have been classic “10 by 2s”—which fantastically describes $10 million property used two weeks a year—are increasingly being used as primary residences.
But the second-home market is now showing signs of health at almost all price points, in almost every market considered, which is helping to eliminate the excess inventory that has been hanging around since the recession. On our list of the 20 best places for second homes, which starts on the following page, fully 16 of the locales registered price increases last year. Many sales last year closed within 10% of the offering price, and all indications suggest that 2013 will be the year of real estate, as BlackRock, the world’s largest stock and bond manager, advised its clients.
That’s even though last year didn’t start out that hot. High-end real-estate sales struggled for much of 2012, until state and federal elections in November and Washington’s fiscal-cliff sideshow in December, energized what seemed to be a second-straight year of lackluster sales. The threat of rising taxes and a mistrust of the stock market together prompted buyers to buy luxury homes.
Wyoming, a state without debt and a budget surplus of about $1 billion, saw a tax-motivated buying surge in Jackson Hole. Palm Beach, Fla, long known as a place of great wealth and oceanfront trophy properties, saw a similar spike. Les Evans, a Palm Beach real-estate attorney, attributed the rise to the wealthy, particularly hedge-fund managers, fleeing high-tax states like New York. Texas and Nevada also benefited from the absence of state income taxes.