Demand for Second Homes Up 100% Year-to-Year
The number of people who locked-in mortgage rates for second homes – in spite of a pandemic-caused economic dip – suggests a K-shaped recovery.
SEATTLE – Sales of vacation homes are soaring, even as millions of Americans grapple with financial devastation triggered by the coronavirus pandemic. In October, demand for second homes skyrocketed 100% from a year earlier – the fourth triple-digit increase in the last five months, according to a new report from Redfin.
The second-home demand outpaced the 50% increase in demand for primary homes.
For its report, Redfin analyzed mortgage-rate lock data from real estate analytics firm Optimal Blue. When homebuyers lock in a mortgage rate for a certain period of time, they’re assured that rate won’t change. And when applying, they must specify whether they plan to use the money for a primary home, secondary home or investment property. Of all rate locks, about 80% result in a property purchase.
Home sales are rising across the board due to record-low mortgage rates and a wave of relocations during the pandemic, but demand for second homes is particularly strong as affluent Americans work remotely, no longer need to send their kids to school in person and face travel restrictions, says lead economist Taylor Marr.
“With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans,” Marr said. “Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic.”
Some of the second homes purchased this year will ultimately turn into primary homes, since it’s common for a buyer to close a deal on a second home before putting their current house on the market, Marr says.
As second-home purchases soar during the pandemic, resort towns report increased sales and demand. Melissa Killham, a Redfin agent in Wisconsin, said that she’s seen demand surge in Lake Geneva – a popular resort town about an hour southwest of Milwaukee.
“The home-tour rate in Lake Geneva has doubled – people from the city can’t travel for vacation so they’re looking for second homes,” she says. “The Lake Geneva school district is also still offering in-person learning, so a lot of families are buying second homes in the area so they can work remotely and send their kids to school.”
The median sale price in seasonal towns grew 21% year-over-year in October to $420,000, outpacing the 14% growth in non-seasonal towns. Redfin defines a seasonal town as a town where more than 30% of housing stock is used for seasonal, recreational or occasional purposes.
“Even when offices reopen, folks will be able to spend more time than ever before in their second homes because many employers will continue to offer flexible remote-work policies,” Marr says. “With workers still commuting in one or two days a week, resort towns that are near major cities will likely continue to heat up.”
© 2020 Florida Realtors®