Cash buyers and demand for short-term rental properties is propelling the second-home market in the mid-Atlantic region, bucking the national trend.
Sales in the region are pacing ahead of pre-pandemic levels, according to data from Bright MLS, a regional MLS site. That stands in contrast to the national market, where mortgage rate locks for vacation homes this year fell to their lowest levels since 2016, according to Mansion Global.
“We’re still seeing prices remain firm primarily because there’s still a very low level of inventory,” said Lisa Sturtevant, chief economist at Bright. “The number of listings available for sale is really low.”
Despite the steep prices, sales in the Del/Mar Coastal and Maryland/West Virginia Panhandle regions are up 140 percent and 261 percent, respectively, over pre-pandemic levels. That’s driven in part by demand for investment properties that will be put on the short-term rental market.
Just over half of vacation home buyers pay in cash, compared to 14 percent of primary home buyers, according to Bright, making the market more resilient to high interest rates.
The high demand may be erasing the market’s typical seasonality.
“People don’t usually buy a beach home in the summer,” Sturtevant said, explaining that buyers usually try to close before prime beach going months so they can either use the house or rent it out. “There may be more opportunistic buyers in summer.”
There’s some guesswork involved in Bright’s analysis: Because there’s no way of distinguishing a primary homebuyer from a second home buyer, the analysis assumes a buyer in areas with a high percentage of vacation homes — areas known for ski resorts or beach houses — is a vacation home buyer.
The market is showing signs of softening.
Rental demand for short-term rentals has dropped from lockdown-era peaks, which Sturtevant believes will lead to an increase in listings.
She said 15 percent of second home sellers last month were investors.
Inventory for homes priced north of $500,000 is close to 2019 levels, according to research from Bright. And as more companies bring workers back to the office, homeowners using their second homes as a co-primary residence will be more likely to sell.
But Sturtevant doesn’t predict a dramatic shift in pricing as long as the economy and employment rates remain strong.
“I don’t think we’re expecting to see prices drop significantly because inventory is still so low and demand is still so high,” she said.
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