According to a new Redfin report, the number of buyers who locked in rates to purchase a second home fell 11.1% year-over-year in June, marking the first lapse in demand after a year-long surge in demand for vacation homes.
As the pandemic continues to wind down, vacation-home demand is steadily declining. The demand for second homes began to surge in June 2020, as pandemic-induced lockdowns made vacation destinations especially desirable. Affluent buyers took advantage of historically low mortgage rates, crowding the market even further.
June’s year-over-year decline in second homes could potentially mean the housing market is finally cooling down. However, these figures may be exaggerated due to the fact mortgage-rate locks for second homes soared in June 2020. Still, it's evident that the demand for vacation homes is slowing down, but not to pre-pandemic levels.
Taylor Marr, Redfin's lead economist, said, "Demand for second homes is dropping back down to earth as many employees return to the workplace this summer. That return to the office, along with soaring prices and tighter lending standards for second homes, is shifting homebuyer demand in favor of primary residences. The allure of owning a vacation home outside the city still exists—as it did even before the pandemic—but the big second-home boom we've seen over the last year is abating."
Additionally, the price gap between seasonal and nonseasonal towns has narrowed slightly since the pandemic began. In seasonal towns, where vacation homes are often located, home prices rose 28% year-over-year in June to $468,000.
Meanwhile, home prices in nonseasonal towns increased 26% year-over-year to $421,000. The price-growth gap narrowed since the height of the pandemic in September 2020 when seasonal home prices increased 22% versus 13% for nonseasonal.
"With workplaces making their remote work policies permanent and employees feeling more confident making long-term decisions, many Americans are moving full time to scenic vacation towns rather than purchasing second homes," said Redfin chief economist Daryl Fairweather. “My family is one example of the trend: Partly because I'm able to work remotely, my family sold our house in Seattle and moved full time to Lake Geneva, WI, to be closer to family and take advantage of its relaxed lifestyle and recreational activities."
Click here to read the full Redfin report, including charts and methodology.
