It’s not uncommon for many vacationers to find themselves checking out the local real estate listings in between boating or sightseeing. In this robust economy, however, many vacationers aren’t just looking; they’re buying.

The National Association of Realtors reports that in a new study that in 1999, buyers purchased 377,000 second homes, up 9.3 percent from 1997. Sales of second homes, in fact, have gone up 27 percent since 1995. Overall, second-home purchases now total six percent of annual home sales, many of them trial retirement homes.

Realtors attribute much of this increase not only to the economy, but to demographics as the Baby Boomers move into their late 40s and 50s. This group alone, according to the Realtors study, is expected to generate 100,000 to 150,000 new second-home housing starts every year for the next 10 years.

The 1997 changes in the federal capital gains tax laws, which eliminated the tax on home-sale profits for most home sellers and allowed such gains to be used for the purchase of second homes, also is helping drive the second-home market, the Realtors study reports.

If you live in the home full-time for two of the past five years before you sell, you may not have to pay any capital gains tax on profits you make on the sale.

So is a vacation home the right buy for you?

It depends on how you plan to use the home (recreation versus a future retirement nest, for example) and your balance sheet.

For example, if you are thinking about buying a condominium in a popular recreation area, where rents and prices are usually high, you may need to consider renting out your property part of the year to help cover the mortgage. In such desirable areas, however, you can almost always count on being able to resell if you need to.

Other tips for buying a vacation home:

--Research an area thoroughly.

The better you know an area, the more predictable the consequences of buying there. Make sure you talk to other property owners, not just the local real estate agency. If you purchase in a more remote area, for example, find out if there are security concerns with homes that are empty part of the year.

Check out resale statistics, too, as well as property taxes. Poor resale rates could prove burdensome if you need or want to sell in the future. Onerous property taxes, while tax-deductible, may tip your balance sheet against a purchase.

--Look carefully at time-share properties.

Many now offer exchange options in which you can exchange your time at your time-share for time at another time-share for a modest fee. However, timeshares are most economical if you can purchase the share outright, as opposed to financing, and of course, if you actually use the property. Purchasing a timeshare in a popular area is wiser than buying one far from the madding crowd in terms of future resale value. .

--Get good tax advice. If you rent out your vacation property part of the year, that rental income nibbles away at your mortgage interest tax deduction. However, you can deduct some of the expenses connected with renting out your property, such as paying for a cleaning service or a rental agent. Cover all the tax bases because in some cases, it may make more sense to continue renting rather than buying.

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