A new study shows sales of "second homes" surged in 2004, and that investment property and vacation homes make up a larger portion of the overall housing market than many had previously believed.

I was shocked to learn that sales of these second homes, including vacation and investment homes, made up over one third of all home sales during the past year. I had always accepted the common wisdom that investment real estate accounted for less than 15 percent of the overall housing market. Apparently, I was working on faulty information in the past. But not anymore.

The study shows that many investors have decided that residential real estate is, indeed, a viable alternative to more traditional investments, such as stocks and mutual funds, which have disappointed many investors in recent years. In record numbers, investors are buying vacation homes. Some of those will be rented out for some portion of the year, while others are set aside primarily for family usage. In either case, vacation home sales are soaring.

In addition, owners are buying investment real estate in an effort to obtain rental income and diversity within their investment portfolio.

I recently participated in a teleconference with David Lereah, chief economist for the Realtors group, as he made public the results of the study. He believes this study is significant in that no previous studies have captured a representative market share for vacation and investment home owners. Lereah also expressed surprise are the results.

Here are some highlights from the study, as provided by the National Association of Realtors:

* Information obtained from 2003 Census Bureau data indicates that there are over 43 million "second homes" in the US, including 6.6 million vacation homes and 37.2 million investment units. That compares with an estimated 72.1 million owner-occupied units.

* One of the biggest shifts in thought from previous years has to do with the motivation for purchasing a second home. Apparently, many baby-boomers that are purchasing second homes are now doing so primarily for investment reasons.

* The typical vacation home buyer is 55 years old and earned $71,000 in 2003, while investment property buyers had a median age of 47 and earned $85,700.

I asked Lereah what percentage of investment property owners held title to multiple properties, but he said this data gave him no answers as to multiple ownership. My guess is that most investment owners also own more than one rental home, but I have no way to verify that.

In looking more closely at the data, it becomes clear that the vacation home owner has different plans from the investment home owner.

For example:

Only 14 percent of vacation home buyers plan to rent their home out to guests. In contrast, only 10 percent of investment home buyers intend to use their home for recreational purposes.

Also, many vacation home owners are looking to the future for a place to live. Fully 27 percent of vacation home buyers hope to retire there one day, while only 14 percent of investment property owners have the same goal.

Lereah speculated that the surge in second home buying will continue for the foreseeable future. He pointed out that the typical buyer is a baby boomer in their peak earning years, and that they had both the financial resources and the desire to own this type of property.

Other data revealed:

* Fully 92 percent of all second home buyers see their property as a good investment. In fact, over a third say it is very likely they will purchase another home within two years. This supports my theory that owners who already are comfortable with investment homes probably will purchase multiple units. Of the investment property purchasers in this survey, almost half said they plan to buy more soon.

* The typical investment home is 18 miles away from the owner’s primary residence, while the buyers of vacation homes were a median distance of 49 miles away.

* Vacation home buyers leaned heavily toward detached single family units, by a margin of more than 4 to 1. The median size was 1,290 square feet.

* In contrast, the typical investment home featured 1,700 square feet, but still was a detached dwelling.

Real estate professionals will take comfort in the finding that, in their search for a second home, 83 percent of buyers used a real estate agent. When questioned further as to where they learned about the home they bought, 31 percent gave credit to the agent, and 24 percent cited a "sign in the yard."

Another 15 percent of the buyers first learned about their purchases from a friend, neighbor or relative. Eight percent knew the seller, seven percent met the builder, and 6 percent found their second home on the Internet.

As interest rates rise in the latter half of the year, it will be interesting to see if this surge in second home sales continues.