Vacation homes became all the rage early in the pandemic, with demand peaking at 90% above normal levels in March 2021. But today, the apparent demand for second properties or vacation homes has fallen to “normal” levels, or at least to the level it was at before the pandemic, as demand is now down by 4% compared to the first quarter of 2020.
This data comes to us by way of Redfin [1], who analyzed Black Knight’s [2] Optimal Blue [3] data to use in this report. Compared to a year ago, demand was still 70% above what it was compared to the beginning of the pandemic.
The expanding interest in vacation homes began in mid-2020, as more affluent Americans took advantage of remote work and low mortgage rates to escape to and invest in vacation destinations. Though demand remained well above pre-pandemic levels, it declined last spring before bouncing back in the fall. This is the third consecutive month that this statistic has declined.
But one deterrent to second-home buyers is the fact that the federal government increased loan fees for second homes in April 2022, adding roughly $13,500 to the cost of purchasing a $400,000 home.
“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” said Taylor Marr [4], Redfin’s Deputy Chief Economist. “Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are. The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”
Click here [5] to view the report in its entirety.