Is this buyers' market a good time to buy a vacation home?

If you're thinking about buying a second home for vacations, retirement or investment purposes, you're not alone. In this buyer's market, many vacation homes now have lower price tags as well as lower mortgage rates.

As baby boomers hit their peak earning years, second-home ownership is expected to grow. In fact, vacation home sales accounted for 33 percent of all real estate sales in 2007 in the United States. The National Association of Realtors says the right time to buy a vacation home might just be now.

But before you consider buying, there are a couple of things to consider:
Buy or rent? Do you really want to be tied down to one location for many of your weekends or vacations? Some people find that once they commit to a vacation home, they miss traveling to new locations or the option of exploring different types of accommodations. Will you really find the time to travel to the second home with work and family commitments?

Ownership costs. With a second home, you'll have two mortgages, two property tax bills and two houses to maintain. Make sure you can afford the home without counting on rental income or straining your budget. Rental income can be helpful in offsetting costs; however, make sure you investigate the local rental market and understand the different income tax treatments of rental property.

Who will keep an eye on the home when you aren't there? Do you have trouble keeping up with your current repair lists and landscaping? If you are considering buying the home with another individual or family, are you prepared to work out the many compromises that would require?

Identify your priorities. Once you've decided you're ready for a second home, you have many more decisions to make. Is it your dream to retire by a lake, to a warmer climate, or close to family? Do you want an isolated, rustic cottage or a low-maintenance condo near a golf course? Decide what you're looking for and get ready to explore the many vacation/retirement options available.

Now that the real estate market has cooled, it may be the best chance to get a second home at a reasonable price. A second home can provide your family with an attractive getaway for years to come, as well as be a solid investment that will still likely appreciate over time.