Riding on the rising tide of baby boomers, second-home sales nationally had been steadily increasing since 2003. And although 2008 showed weakening of second-home purchases, long-term demand looks favorable due to the large numbers of people in their prime years for buying a second home.

Presently, there are 39.2 million people in the United States between the ages of 50-59, and this age group has been the dominant purchaser of second homes. There are another 44.8 million people between the ages of 40-49 following the 50-59 age bracket, so long-term demographics for second-home sales are positive.

In 2008, overall second-home purchases slipped to 30 percent of all existing and new-home transactions in 2008, according to data from the National Association of Realtors. Of these sales, 21 percent were for investment properties, and 9 percent were vacation homes. Vacation-home sales dropped by a greater amount, and this makes sense given the effect of the negative economic climate on discretionary purchase. Lawrence Yun, chief economist for NAR says, "A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas."

The median price for vacation properties dropped 23.1 percent from 2007, and the median price for investment properties dropped 28 percent. This is probably a result of the many sales of deeply discounted, distressed properties pulling down the median prices. States that are considered vacation-type locations — including Florida, California, and Arizona — are leading the numbers in foreclosed properties.

In highly desirable regions, like Florida's coastline, upscale properties that were offered for a million dollars a few years ago are now selling for less than half of that. Condos that can now be purchased for $100,000 were worth two to three times that amount only two or three years ago. Those that can afford to buy are snapping up incredible deals while mortgage interest rates stay low.

NAR reports in its June Market Forecast that nationally, there have been three straight months of rising pending homes sales. California is leading this trend, with many buyers entering the market simultaneously, assuming housing prices have bottomed and are beginning to rise. It is reported that multiple bidding on lower-priced homes is presently common in California.

In Santa Fe, most second homes are purchased as vacation properties. Buyers of these homes do not purchase with the intent of renting, and do not need the rental income to sustain the property. In some areas of Santa Fe, where there is an unusually high concentration of second homes, prices have slipped. It is assumed that the owners of these properties are reacting to the economic climate and feel the need to eliminate a financial burden to retain liquidity. I recently spoke with a Santa Fe appraiser familiar with these pockets of clustered second homes, and he said that his data showed a decline in price reductions with the market becoming far more stable.

Personally, I have seen a sizeable increase in requests for mortgage financing for second-home purchases in Santa Fe in the last couple of months. This seems to follow the California and Florida trends. Let's hope this is a sign of the beginning of recovery for the local real-estate markets.

David Hultin (505-946-2521) is a residential mortgage-loan officer for New Mexico Bank and Trust. He previously worked in the mortgage divisions of two of the largest banks in the United States.