Redfin Reports Demand For Second Homes is Cooling to Pre-Pandemic Levels

Rhea-AI Summary

The number of buyers locking in mortgage rates for second homes rose 48% year-over-year in May, as reported by Redfin (NASDAQ: RDFN). However, this marks a decline in growth rates, falling below 80% for the first time in a year, partly due to low demand in May 2020 amid the pandemic. Factors affecting this trend include high prices, the reopening of offices, and tighter mortgage lending rules limiting second-home loans to 7% of lenders' pipelines. Demand is cooling as potential buyers back away from overpriced properties.

Positive

• 48% year-over-year increase in second-home mortgage locks in May.
• Annual increase in May is now similar to pre-pandemic levels.

Negative

• First time annual growth rate for second-home purchases fell below 80%.
• High real estate prices are driving buyers away.
• Tighter mortgage lending rules limiting second-home loans may restrict market access.

SEATTLE, June 10, 2021 /PRNewswire/ -- (NASDAQ: RDFN) —The number of buyers who locked in mortgage rates to purchase a second home nationwide rose 48% year over year in May, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Though that's a significant increase, it's the first time in a year the annual growth rate has fallen below 80%. Year-over-year increases are likely exaggerated because demand for second homes was relatively low in May 2020 due to the coronavirus pandemic slowing real estate activity.

Demand for vacation homes jumped in June 2020 as the U.S. real estate market came roaring back to life, with a 110% year-over-year increase in second-home mortgage locks, and the level remained elevated through April. The annual increase in May is similar to pre-pandemic levels.

There are several reasons for the cooling in second-home demand this spring. High prices are likely playing a role, as is the reopening of offices. The typical spring slowdown in overall pending home sales is also impacting vacation-home sales. Plus, many people with the desire and means to buy a vacation home this year have already done so throughout the pandemic.

Additionally, mortgage-lending rules for second homes tightened in April and May. Under new federal rules, second-home and investment property mortgages can make up just 7% of a lender's total pipeline. That's on top of regulations that make it difficult to get a loan for condo towers in resort areas that may be used as short-term rentals.

"In addition to tighter lending rules, vacation-home buyers are starting to react to rising prices," said Redfin Chief Economist Daryl Fairweather. "Home prices have been climbing rapidly for the last several months, and it seems they've finally gotten prohibitively high for some people searching for second homes. Vacation-home buyers are quicker to back away from properties that are potentially overpriced because they're not a necessity. People searching for primary residences may have to shell out more money than they want to because they need a roof over their heads."

"A lot of the people who were driven to hunt for vacation homes over the last year have already bought them," Fairweather continued. "The pandemic and remote work drove many affluent Americans to relocate to vacation destinations, at least part of the time. But with offices reopening and life returning to some semblance of normal, people are less focused on fleeing to the beach or the lake."

To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/second-home-demand-drops-pre-pandemic-levels

About Redfin
Redfin (www.redfin.com) is a technology-powered real estate broker, instant home-buyer (iBuyer), lender, title insurer, and renovations company. We sell homes for more money and charge half the fee. We also run the country's #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Since launching in 2006, we've saved customers nearly $1 billion in commissions. We serve more than 95 markets across the U.S. and Canada and employ over 4,100 people.

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 recent trend did Redfin report regarding second home mortgage locks?

Redfin reported a 48% year-over-year increase in second-home mortgage locks in May.

What is the current state of second-home demand according to Redfin?

Second-home demand is cooling, with the annual growth rate falling below 80% for the first time in a year.

What factors are contributing to the cooling demand for second homes?

Factors include high prices, reopening of offices, and tighter mortgage lending rules.

How did second-home mortgage lending rules change recently?

Recent rules limit second-home and investment property mortgages to 7% of a lender's total pipeline.

What impact did the pandemic have on second-home purchases?

The pandemic initially drove a surge in second-home purchases, but demand is now stabilizing.