Sales of Minnesota vacation homes pick up, but buyers are still cautious

If walls could talk, the ones inside an attractive house in the Brainerd Lakes area might tell the tale of boom, bust and incremental recovery in both the vacation home and wider real estate market.

With a staircase, cabinets and trim made of knotty pine, the one and a half story house has the simple decor of a rustic cabin, though it's anything but. It has four bedrooms, three bathrooms, a guest cottage and four-car garage. Listed at $549,000, it's on the high end of medium-priced homes in the area, said Brad Wadsten, an agent with Edina Realty.

As the economy continues to improve, real estate agents say sales of vacation homes are picking up. But with memories of the housing bust still fresh in their minds, many buyers are treading carefully into the market - with good reason.

The house on Borden Lake offers a cautionary tale. Construction began in 2004, but after the builder fell on hard times, work stopped and the property went into foreclosure. The current owners bought it in 2009.

"They spent a good deal of time and money finishing it off and bringing it up to what they wanted to have," Wadsten said. "And now it's ready for a new family to take over and enjoy."

The home has been on the market for about 90 days, but while it is move-in ready, chances are it could be awhile before a buyer signs a contract. Data from the Greater Lakes Association of Realtors show the median time on the market for a waterfront home in the Brainerd Lakes area is six and a half months.

That figure -- as well as the median sales price -- has held steady over the past two years even as the number of sales has doubled. By comparison, in the Twin Cities -- a traditional housing market -- the median price has shot up by nearly a third since mid-2012, as the amount of time homes stay on the market has tumbled.

The economic recovery unleashed a lot of pent-up demand for primary residences in the Twin Cities, said Jim Eisler, managing broker for Edina Realty's Brainerd-area office. But people now considering a second house are just dipping a toe into the lake home market.

"The buyer that I would tell you is in the market today is a very cautious buyer, a very well thought-out buyer," Eisler said. "They do their due diligence. They do their research."

Eisler said when the housing bubble burst, lake home prices fell 30 to 50 percent, a market correction that brought property speculation to a screeching halt. These days, he said, buyers are looking for homes to live in, sometimes permanently.

That's certainly true of Vicki Lipstreuer and Glen Goodwin of Cincinnati. The couple plans to spend their retirement in the Brainerd Lakes area.

Lipstreuer, 48, and Goodwin, 53, say they've been shopping for two years and will take all the time they need to find the right place.

"We're pretty methodical with our purchases. I think once we find it, we're ready to go with it," said Goodwin, who grew up in Minneapolis.

While overall prices for waterfront homes in central Minnesota have held steady over the past two years, Lipstreuer said property prices along the most popular lakes -- including the Whitefish chain and Gull Lake -- have risen. She said that's forced them to revise their expectations and their budget.

Vacation homes make up a small fraction of housing sales in Minnesota. But improvements in the market show increasing confidence in the overall economy, University of St. Thomas real estate professor Herb Tousley said.

"If people are out buying vacation homes, they're feeling pretty secure about their employment and financial situations," Tousley said. "It's a big investment, so I do think it's an indicator. It's certainly not the only indicator, but it's one worth watching."

Eisler, the Edina Realty manager, said the biggest benefit to the drop and now stabilization in vacation home prices, is that more people can afford the time-honored Minnesota experience of spending summer evenings up at the lake.