Demand for Vacation Homes Falls: First Time in a Year
It’s too soon to call it a trend, but the pandemic-driven push for vacation homes appears to be slowing as an increasing number of buyers search for year-round homes.
SEATTLE – Based on the number of buyers who locked in mortgage rates to purchase a second home, the demand for a vacation property has declined a bit – the first time in a year – as more buyers seek a home for year-round living.
Nationwide, the number of mortgage-rate locks for a second home fell 11.1% year-over-year in June, a reversal from the yearlong surge in demand for vacation homes driven by the pandemic, according to a new report from Redfin.
Demand for second homes started surging in June 2020 as pandemic-related lockdowns and a new-found ability to work remotely made vacation destinations desirable as low mortgage rates made it possible.
The 11.1% decline is the first drop since April 2020 after more than a year of double- and triple-digit increases in mortgage-rate locks for second homes.
“Demand for second homes is dropping back down to earth as many employees return to the workplace this summer,” says Taylor Marr, Redfin’s lead economist. “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.”
The drop in the year-over-year growth rate is somewhat exaggerated because second-home mortgage-rate locks soared in June 2020. After accounting for the June 2020 surge, demand is starting to slow down, but it’s still stronger than it was before the pandemic hit.
Price-growth gap between seasonal and non-seasonal towns
In seasonal towns that host most second homes, housing prices rose 28% year-over-year in June (to $468,000) – their 12th month in a row of 10%-plus year-over-year price growth.
“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,” says Redfin Chief Economist Daryl Fairweather. “That’s one reason why demand for second homes is waning while seasonal areas remain popular. 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, Wisconsin, to be closer to family and take advantage of its relaxed lifestyle and recreational activities.”
Meanwhile, home prices in non-seasonal towns rose 26% (to $421,000).
The price-growth gap between seasonal and non-seasonal towns has narrowed since the height of the pandemic. The discrepancy peaked in September 2020, when prices in seasonal towns increased 22% year over year versus 13% for non-seasonal towns.
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