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Demand for second-home mortgages took a nosedive in February, a new report says, but Cape Cod’s inventory crunch means most buyers on the peninsula won’t feel any benefit.
A new report from online brokerage Redfin, citing mortgage rate-lock data from analytics firm Optimal Blue, showed demand for second-home loans fell nearly 28 percent last month as mortgage interest rates rose and plans for new fees on second-home loans were announced. Overall demand for vacation home mortgages was still 35 percent higher than it was right before the pandemic began, however.
“Rising mortgage rates, combined with rising home prices, are hitting the second-home market much harder than the primary-home market,” Redfin Chief Economist Daryl Fairweather said in a statement that accompanied the report. “That’s largely because vacation homes are optional. People don’t need a second home, but they do need a place to live. Still, people are buying up vacation homes more than they were before the pandemic, as work remains more flexible than it used to be.”
The average interest rate on a 30-year, fixed-rate mortgage rose rapidly throughout February, reaching a high of 3.92 percent in seven days ending Feb. 17. That’s up from 3.55 percent at the start of February and 3.11 percent at the end of 2021.
Any reduction in demand won’t likely help Cape Cod buyers, however, said Cape Cod & Islands Association of Realtors CEO Ryan Castle.
“We’re going to see 30 to 40 percent, year-over-year declines in closed sales because we don’t have inventory for sale,” he said. “What we’re seeing now is a frenzied amount of buyers like we saw last spring, however we still have less inventory now.”
Barnstable County has only seen 418 new single-family homes come on the market through Feb. 28 this year, the CCIAOR reported, a 10.7 drop from 2021 and a 43.13 percent drop from February 2019. The average days on market for a single-family home has fallen from 130 in February 2019 to 36 in February 2022.
Properties that attract 10 or more offers, half of them in cash, are still a regular feature of the market, he said.
In addition to price jumps caused by bidding wars, buyers could also be getting fatigued, Castle said.
“There’s nothing to buy, so there’s nothing to put a mortgage application,” he said.
The persistent lack of inventory is becoming “scary,” he said.
“It’s becoming increasingly harder to hire. It’s becoming increasingly hard for businesses to be open year-round. What does a Cape cod economy look like without the ability for [developers to build] more housing?” he said.
