Redfin reports that, in September, demand for second homes was 60% higher than it was before the coronavirus pandemic, according to an analysis of mortgage-rate lock data from real estate analytics firm Optimal Blue.
The popularity of vacation homes skyrocketed at the onset of the coronavirus pandemic, with many Americans opting to abandon city-life and work remotely. But, the surge in demand for second homes started to wane as cities lifted stay-at-home restrictions, the initial shock of the pandemic faded, spring homebuying season ended, the vaccination rollout increased, and the overall housing market began to cool.
Redfin Deputy Chief Economist Taylor Marr noted that a new rule from Fannie Mae contributed to the slowdown in vacation-home demand, as plans were announced in March to limit the number of second-home and investment-property loans it would buy, making it more challenging and expensive for some buyers to take out mortgages on vacation homes.
Redfin reported recently that demand for vacation homes in August had fallen 19.3% year-over-year, marking the third-consecutive month of declines, while demand for primary homes fell by 1%, its second-month of decline. According to Redfin Data Journalist Lily Katz, just because the numbers are down year-over-year, it is important to note that demand for second homes skyrocketed by 172% during the pandemic, and peaked in April. But as the market begins its seasonal cooling, demand for primary and secondary homes has begun to ease.
"The market may have overreacted to the Fannie Mae rule a bit, which would explain why we've been seeing demand for second homes bounce back," Marr said. "Mortgage rates are on the rise as well, which is likely creating a renewed sense of urgency for vacation-home buyers who want to purchase properties before rates climb even further."
The Treasury Department and Federal Housing Finance Agency (FHFA) recently announced that they would remove the previously mandated restrictions on Fannie Mae in an effort to boost housing supply. This will likely help keep demand for second homes above pre-pandemic levels for the foreseeable future.
Click here for more information on Redfin’s analysis of second homes.