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Demand for vacation homes dropped sharply for the second month in a row in March, with mortgage-rate locks for second homes at their lowest level since May 2020, according to a new report from Redfin.
Demand for vacation homes was still up 13 percent from pre-pandemic levels, but it is declining after a pandemic-fueled second-home boom last year, Redfin said in a statement. However, the brokerage expects demand for second homes to remain above pre-pandemic levels in the near future, as many Americans embrace remote work.
The slowdown in demand for vacation homes joins other early signals that the historically fast rise in mortgage rates and record-high home prices are pricing out some buyers.
“The pandemic-driven surge in sales of vacation homes is coming to an end as mortgage rates rise at their fastest pace in history, causing some second-home buyers to back off,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “When rates and prices shoot up so much that a vacation home starts to look more like a burden than a good investment and a fun place to bring your family on the weekends, a lot of prospective buyers have second thoughts. The new second-home loan fees that kicked in on April 1 were also a deterrent. Plus, some buyers’ down payments – and their nerves – probably took a hit when the stock market dipped over the last few months.”
Interest in vacation homes skyrocketed in mid-2020 as many affluent Americans started working remotely and mortgage rates dropped to record lows, with mortgage-rate locks for second homes reaching a peak of 88 percent above pre-pandemic levels in March 2021.
