Redfin Reports Demand For Vacation Homes Is Now Below Pre-Pandemic Levels

Rhea-AI Summary

Redfin reports a significant drop in vacation home demand, which has now fallen below pre-pandemic levels for the first time in two years. Mortgage-rate locks for second homes decreased by 4% from pre-pandemic levels in May, a decline driven by high home prices, rising mortgage rates nearing 6%, and new federal loan fees. These factors have created a challenging environment for potential second-home buyers, with monthly payments skyrocketing. This shift marks a drastic change from the peak demand experienced in March 2021.

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• None.

Negative

• Demand for vacation homes has fallen below pre-pandemic levels for the first time in two years.
• Mortgage-rate locks for second homes decreased by 4% from pre-pandemic levels in May.
• High home prices and mortgage rates nearing 6% have deterred potential buyers.
• New federal loan fees have added roughly $13,500 to the cost of purchasing a $400,000 home.
• Current conditions are likely to continue cooling the second-home market.

High home prices and mortgage rates, along with economic uncertainty and an increase in second-home loan fees, have put an end to the pandemic-driven vacation-home boom

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Demand for vacation homes has fallen below the pre-pandemic baseline for the first time in two years, with mortgage-rate locks for second homes down 4% from before the pandemic in May, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That’s down from a revised rate of 3% above pre-pandemic levels a month earlier, and 70% above pre-pandemic levels a year earlier.

Demand for second homes is declining due to high home prices, mortgage rates that have rapidly risen to nearly 6% and a slumping stock market–factors that are also cooling the rest of the housing market. Another deterrent to second-home buyers is the fact that the federal government increased loan fees for second homes in April, adding roughly $13,500 to the cost of purchasing a $400,000 home.

“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” said Redfin Deputy Chief Economist Taylor Marr. “Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are. The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”

The drop in vacation-home demand marks a drastic change from the second half of 2020 and 2021, when mortgage-rate locks for second homes skyrocketed due to record-low mortgage rates and the flexibility to work from anywhere thanks to remote work. Demand peaked in March 2021, when it was about 90% above pre-pandemic levels.

Interest in vacation homes started declining sharply in February as mortgage rates began their ascent. The average 30-year fixed mortgage rate reached 5.81% in the week ending June 23.

To read the full report, including charts and methodology, please visit: https://www.redfin.com/news/second-home-demand-falls-may-2022.

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. 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. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220624005058/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What recent trends have been observed in the second-home market for RDFN?

Recent data shows that demand for vacation homes has decreased below pre-pandemic levels for the first time in two years.

How have mortgage rates affected second-home demand for RDFN?

Mortgage rates have risen to nearly 6%, which, along with high home prices, has contributed to a decline in second-home demand.

What impact did federal loan fee increases have on RDFN's second-home market?

Increased federal loan fees in April have added approximately $13,500 to the cost of purchasing a $400,000 second home.

When did second-home demand peak for RDFN and what has changed since?

Second-home demand peaked in March 2021 but has since declined sharply, particularly from February 2022 as mortgage rates began to rise.