Redfin reports pandemic-driven second home boom is ending | 2022-04-11 | press releases
After last year’s vacation home frenzy, buyers are retreating in the face of rising mortgage rates and an increase in second-home borrowing fees
(NASDAQ:RDFN) – Demand for vacation rentals fell sharply in March for the second straight month, with second-home mortgage rate lockdowns at their lowest since May 2020, according to a new report report by Redfin (www.redfin.com), the technology-supported real estate agency.
Demand for vacation rentals was still 13% above pre-pandemic levels, but is declining after a pandemic-driven second home boom last year. Still, Redfin believes demand for second homes will remain above pre-pandemic levels going forward as long-distance work becomes permanent for many Americans.
The slowing demand for vacation homes joins other early signs that historically rapid rises in mortgage rates and record-high home prices are pricing out some buyers.
“The pandemic-driven surge in vacation home sales is coming to an end as mortgage rates are rising at the fastest pace in history, prompting some second-home buyers to back down,” said Redfin’s associate chief economist, Taylor Marr. “When rates and prices skyrocket so much that a holiday home looks more like a liability than a good investment and a fun place to get your family together for the weekends, many potential buyers have concerns. New fees for second-home loans, which came into effect on April 1, also acted as a deterrent. Also, some buyers’ deposits — and their nerves — have likely taken a hit when the stock market has plummeted in recent months.”
Growth in demand for primary homes outpaced demand for secondary homes for the second straight month, with primary residence mortgage rate caps up 34% from pre-pandemic levels. Demand for first homes has remained roughly the same since June 2020.
Interest in vacation homes skyrocketed in mid-2020, as many wealthy Americans began working remotely, and mortgage rates fell to record lows, with second-home mortgage rate lockdowns peaking in March 2021 88% above pre-pandemic levels. Demand fell sharply over the past two months as mortgage rates shot up at such a fast pace, hitting 4.67% by the end of March, and some workers began to return to the office.
Another deterrent to demand was the upcoming hike in second-home loan fees, which rose about 1% to 4% from April 1. The change adds about $13,500 to the cost of buying a $400,000 home for a typical vacation home buyer and will continue to dampen interest in vacation homes in the coming months.
To read the full report, including graphs and methodology, please visit: https://www.redfin.com/news/second-home-demand-drop-march-2022/
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