When the economy took a dive in 2007/8, there was a noticeable decline in the fractional home market. The luxury of purchasing a share in a second home was a financial risk too great for many. Even when the housing market and other economic indicators started to improve again, the fractional market remained weak. However, that seems to be changing. Recent reports indicate a definite rebound in the market. We talked to management and owners at several high end private residence clubs to learn more about why sales are back up and why people are attracted to buying a share of a property.

Downs and Ups

John Dixon, a broker for Fairmont Heritage Place's El Corazon in Santa Fe, recalls that prior to 2008, they were selling an average of two or three fractional ownerships per month. "Suddenly," he said, "it came to a complete standstill." Coincidentally, 2008 was when Fairmont Heritage Place opened their Ghirardelli Square residence in San Francisco. Both properties have seen a definite resurgence in interest in the past year or so, and both Dixon and the Ghirardelli property's Kevin Morgan see this as a sign of the stronger housing market. According to Dixon, "The housing market needed to pick up before the fractional market could come back."

Fairmont Ghiradelli Square

Another fractional community seeing strong interest is Pronghorn, in Bend, Oregon. Project manager Michael Kosmin, notes that they had "a very successful relaunch" this year with a 90% occupancy rate.

One factor that might have contributed to the delay in the market's pick-up is the lack of financing available for fractional ownerships. Despite these being one of the most secure property investments available, with foreclosure rates typically at zero, the burst of the property bubbles in Florida and Las Vegas meant that banks are reluctant to finance purchases. However, Morgan describes the average fractional owner at Ghirardelli Square as having a net worth of $2-5 million, so for many, financing of the purchase is not a concern.

Incentives to Buyers

Fractional properties are deeded property and discounts would negatively impact the investment for all owners, so you won't find many reduced prices in this segment of the real estate market. Nevertheless, some incentives are being offered to lure potential buyers. Pronghorn allows people to come and get a taste of life in Oregon with their Real Estate Preview Package. For $299, interested parties can stay for two nights on one of the properties, while gaining access to the on-site dining options and golf-courses. (Pronghorn is the only property west of the Mississippi with two designer courses). Buyers at El Corazon receive a Fairmont gift card of up to $15,000 value and as many as 1 million air miles upon purchase of a fractional ownership, allowing them to take full advantage of Fairmont's other properties around the world.

Who is buying?

The majority of buyers of fractional properties seem to be aged 50+. With regards to geographic location, it varies from property to property. Pronghorn sees more than 50% of its buyers from California, attracted by the outdoors, better tax rates, and a better quality of life. El Corazon attracts a large number of retired Texans, drawn to Santa Fe by the climate and by what Dixon describes as the city's "old-world, Spanish, exotic flair but within the United States". Somewhat surprisingly, the majority of Ghirardelli Square owners live within a mere 120 miles of the city. Given the extreme property prices and hotel rates within San Francisco, a fractional property offers a sound investment and easy access to all that the city has to offer – opera, ballet, fine restaurants. High property prices and the city's international vibe may also explain why Ghirardelli Square has recently seen increased interest from international buyers; Chinese and Canadians are among those taking advantage of the property.

Why are they buying?

We have already mentioned some of the benefits of owning a fractional, both from a financial and a lifestyle perspective. For more insight, we asked some owners what they find most rewarding about the fractional lifestyle.

"Purchasing a fractional home was just more practical for me and my wife. We really enjoy the country club lifestyle and connecting with other members of the community. We have been coming to Pronghorn for years, and as a result of our fractional ownership, we have made fast friends with many of the other owners and long lasting memories at Pronghorn. We have also convinced two of our other friends to purchase a fractional ownership. We love being part of the growing community!" - Tim Owens, Pronghorn owner
"We had been visiting Santa Fe for years and thought that we might buy something, but always worried about the upkeep and maintenance. El Corazon had an open house so we stopped in to take and look to see what it was all about. It is perfect. They do their best to accommodate you down to the smallest request. The exchange program allows you to trade a week for a residence somewhere else, or one of the Fairmont Hotels! We are currently planning a trip to exchange for a week in Paris." - Kayla Roughton, El Corazon owner
"This particular fractional ownership allows us the flexibility to utilize the residence at many different times of the year. Our children live in the area and we love the convenience. Now that the owners of the Chelsea Market in New York have purchased the Ghirardelli Square Plaza, and are in the process of renovating areas, adding new shops and restaurants, we are very hopeful that our investment will increase. We have been very pleased with the flexibility this program gives our family to travel." - Mary Ann Sheely, Ghirardelli Square owner

From our conversations with both fractional property management and buyers, it seems clear that at least some parts of the market are on the rebound. The benefits of fractional ownership are many – financial, geographical, ease of use, entertainment options, proximity to family members. The reasons people buy really hasn't changed much over the years, here's an earlier article with lots of comments from fractional buyers

Our site can help you find the right property, whether you search our fractional homes section, or if you choose to search by geographic location.

Editorial Update: Having said all of the above, the full 2015 results for the overall fractional and residence club market, show no real change between 2014 and 2015.