Demand for Vacation Homes Soared 84% Year Over Year in January, Symbolizing Uneven Financial Recovery in the U.S.

Rhea-AI Summary

In January, mortgage applications for second homes surged by 84% year over year, according to a Redfin report. This marks the eighth consecutive month of over 80% growth, despite a drop from a peak of 118% in September. In contrast, primary home applications grew by just 36%. The report indicates that home prices in seasonal towns increased by 19% to $408,000, surpassing a 13% rise in non-seasonal towns. This trend highlights the impact of remote work and an uneven economic recovery resulting in wealth disparities.

Positive

• Mortgage applications for second homes increased by 84% year-over-year in January.
• Continued high demand for vacation homes despite slight monthly decline.
• Home prices in seasonal towns rose 19% year-over-year, indicating strong market demand.

Negative

• Demand for primary homes rose only 36%, the smallest increase since May.
• The economic recovery appears uneven, benefiting affluent buyers while lower-income individuals face challenges.

SEATTLE, Feb. 9, 2021 /PRNewswire/ -- (NASDAQ: RDFN) — Mortgage applications for second homes soared 84% year over year in January, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. While that's down from a peak 118% year-over-year increase in September, it's up significantly from a year ago and marks the eighth straight month of 80%-plus year-over-year growth.

The annual rise in second-home applications is more than double the increase in applications for primary homes. Demand for primary residences rose 36% year over year in January, down from the 65% peak in September and the smallest increase since May.

The report is based on a Redfin analysis of mortgage-rate lock data from real estate analytics firm Optimal Blue. A mortgage-rate lock is an agreement between a homebuyer and a lender that allows the homebuyer to lock in an interest rate on a mortgage for a certain period of time, offering protection against future interest-rate hikes. Homebuyers must specify whether they are applying to secure a mortgage rate for a primary home, a second home or an investment property. Roughly 80% of mortgage-rate locks result in actual home purchases.

The continued popularity of vacation homes is indicative of the rise in remote work due to the coronavirus pandemic. With white-collar workers able to work remotely and children learning from home, many affluent Americans are opting to spend at least part of their time outside of densely packed cities and decamping to vacation destinations. The demand for second homes is also representative of the K-shaped economic recovery from the pandemic-driven recession, with scores of lower-income Americans continuing to suffer financially while many high earners benefit from skyrocketing home values and well-performing stock portfolios.

"Although demand is down slightly from the fall peak, the fact that nearly twice as many second-home buyers submitted applications in January as the year before means the popularity of vacation towns is not a fad," said Redfin economist Taylor Marr. "Many Americans have realized remote work is here to stay, allowing some fortunate people to work from a lakefront cabin or ski condo indefinitely. But while many well-off remote workers are able to follow their dreams and purchase second homes, it has become even more difficult for many lower-income people to buy a primary residence as home values rise and the recession disproportionately impacts employees in the service sector."

Overall homebuying demand has been up over the last several months due to low mortgage rates, remote-work-driven relocation and desire for more space for home offices and homeschooling. Total home sales were up 16% year over year in December (the most recent month for which data is available), the fourth-biggest increase on record, and pending sales were up 35%.

Home prices in seasonal towns rose 19% year over year in December

Meanwhile, home values are rising by double digits in both seasonal and non-seasonal towns, but seasonal towns are seeing bigger increases.

The median sale price for homes in seasonal towns rose 19% year over year in December—the most recent month for which data is available—to $408,000. Home prices in non-seasonal towns grew 13% to $365,000 over the same time period. For this analysis, Redfin defined a seasonal town as an area where more than 30% of housing is used for seasonal or recreational purposes.

To read the full report, please visit: https://www.redfin.com/news/second-home-purchases-increase-january-remote-work.

About Redfin
Redfin (www.redfin.com) is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country's #1 nationwide brokerage website, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 90 markets in the United States and Canada. Since our launch in 2006, we have saved our customers over $800 million and we've helped them buy or sell more than 235,000 homes worth more than $115 billion.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

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SOURCE Redfin

FAQ

What was the increase in mortgage applications for second homes in January 2021?

Mortgage applications for second homes increased by 84% year over year in January 2021.

How much did primary home mortgage applications increase by in January 2021?

Primary home applications rose by 36% year over year in January 2021.

What are the median sale prices for homes in seasonal and non-seasonal towns?

In January 2021, the median sale price for homes in seasonal towns was $408,000, while non-seasonal towns had a median of $365,000.

What is driving the demand for second homes according to the Redfin report?

The demand for second homes is largely driven by the rise in remote work due to the pandemic.

What does the report say about the economic recovery in the US?

The report indicates an uneven economic recovery, with high earners benefiting more than lower-income individuals.