Demand for second homes up 87% from pre-pandemic

Buyer interest may cool as mortgage rates rise: Redfin

National /
Feb.February 10, 2022 10:45 AM

(iStock/Illustration by Steven Dilakian for The Real Deal)

Nearly two years into the pandemic, buyers are still flocking to vacation homes to take advantage of remote work and low mortgage rates — but the market could be nearing its peak.

Demand for second homes was 87 percent above pre-pandemic levels in January, according to Redfin. The level of demand was its highest in a year, nearly rivaling the 90 percent gain from September 2020 and recovering from a summer dip.

Buyer interest in second homes surpassed demand for primary residences, which rose 42 percent above pre-pandemic levels in January, according to Redfin.

As mortgage rates tick up, however, demand is likely to falter.

“While I expect demand for second homes to remain higher than it was before the pandemic, mostly because of remote work, it may fall slightly in the coming year as mortgage rates continue to go up and fees for second-home loans increase,” said Redfin deputy chief economist Taylor Marr.

Rates surpassed 3.5 percent last month and Redfin expects the average mortgage rate to hit 3.9 percent by the end of the year.

Redfin measured demand by analyzing mortgage-rate lock data provided by Optimal Blue. About 80 percent of mortgage-rate locks result in home purchases.

Opportunities for buyers seeking second homes are also beginning to dwindle.

In seasonal towns, defined as those where at least 30 percent of housing is used for seasonal or recreational purposes, the number of homes for sale dropped by 29 percent year-over-year in the fourth quarter. Prices in these towns rose 20 percent year-over-year in December to a $501,000 average, the 18th straight month of double-digit price growth.

In non-seasonal towns, inventory dropped by 16 percent, a much slower pace year-over-year. Prices rose 13 percent year-over-year, hitting $408,000.

An analysis of mortgage-rate locks by Pacaso in December showed second-home buyers had developed a widespread interest in the Southeast. Franklin County, on the Florida panhandle, had the largest year-over-year increase in second-home purchases during the first 10 months of 2021. Other rising second-home markets include Sevier County in Tennessee and Trigg County in Kentucky.





    Related Articles

    arrow_forward_ios
    The glamping tent (Glamping Hub, iStock)
    Happy glamper: Tented Airbnb only miles from Hawaii volcano
    Happy glamper: Tented Airbnb only miles from Hawaii volcano
    1200 Silo Ln, York, NE 68467 (Redfin, iStock)
    Missile silo converted into apocalypse-ready home asking $550K
    Missile silo converted into apocalypse-ready home asking $550K
    Elvis Presley and his childhood home in Tupelo, MI
    Don’t be cruel: Elvis childhood home back on auction block
    Don’t be cruel: Elvis childhood home back on auction block
    Passage Island (Fay Ranches, iStock)
    Private Alaskan island that expands at low tide to ask $20M
    Private Alaskan island that expands at low tide to ask $20M
    A photo illustration of No. 15 Shouson Hill Road West in Hong Kong (Emperor International Holdings Limited, iStock)
    Hong Kong’s priciest 2022 home fetches $111M
    Hong Kong’s priciest 2022 home fetches $111M
    116 East 65th Street and Ghislaine Maxwell (Zillow, iStock)
    Investor Frederick Rudd sells Ghislaine Maxwell’s former UES townhouse
    Investor Frederick Rudd sells Ghislaine Maxwell’s former UES townhouse
    HomeLight CEO Drew Uher (HomeLight, iStock)
    HomeLight lays off a fifth of its workers, weeks after raising $60M
    HomeLight lays off a fifth of its workers, weeks after raising $60M
    Berkshire Hathaway HomeServices' Steven James (right) and Brad Loe (BHHS, iStock)
    Berkshire Hathaway HomeServices wants to be a New York contender
    Berkshire Hathaway HomeServices wants to be a New York contender
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...