Redfin Reports Demand for Vacation Homes Sits Near 7-Year Low Due to High Housing Costs, Return-to-Office Mandates
- None.
- Mortgage-rate locks for second homes down significantly. Second-home demand remains low. Affluent Americans less interested in second homes. Short-term rental regulations and cooling rental market affecting demand.
Mortgage rate locks for second homes are down nearly
August marks the 14th-straight month that second-home demand has hovered at least
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; roughly
Demand for second homes is also down from a year ago. Mortgage-rate locks for second homes is down
The plunge in mortgage locks for vacation homes comes after they skyrocketed during the pandemic, hitting a peak of
High prices and loan fees, plus diminishing appeal of rental properties, deter second-home buyers
Mortgage rates rose to a two-decade high in August, keeping demand low for both primary homes and second homes. Still-high home prices, the elevated cost of other goods and services, the uncertain economy, and a lack of new listings are also holding back buyers of both home types.
But the drop in demand for vacation homes is bigger, due to a variety of factors:
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It’s more expensive to buy a second home. The typical home in a seasonal town—where many second homes are located—sells for
, up$564,000 5% from a year earlier. That’s compared with for homes in non-seasonal towns, also up$421,000 5% . Mortgage rates for second homes are also typically higher. Finally, the federal government increased loan fees for second homes in 2022, often adding tens of thousands of dollars to the cost of purchasing a home. - Many workers are returning to the office. The allure of second homes has diminished as many companies call workers back to the office, at least part of the time.
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Short-term rentals are less attractive. Buying a vacation home to rent it out on a short-term rental site like Airbnb may be less attractive than it once was. Local governments including
New York City are instituting new short-term rental regulations, like new taxes and strict permitting, that cut into profits and make the business more difficult. - The long-term rental market is cooling. Buying a vacation home to rent it out long term is less attractive, too. The rental market has cooled from its pandemic peak; although asking rents are still high, many landlords are being forced to offer concessions to attract renters. Plus, there’s a rising number of vacancies for landlords to fill, with many new units set to hit the market soon.
Demand for second homes is up slightly from the bottom it hit in the beginning of the year. That’s likely because home prices have come down in some second-home hotspots, including
To view the full report, including a chart and methodology, please visit: https://www.redfin.com/news/vacation-home-demand-drops-august-2023/
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Source: Redfin