Redfin Reports the Pandemic-Driven Second-Home Boom Is Coming to an End

Rhea-AI Summary

Demand for vacation homes has sharply declined for two consecutive months, with mortgage-rate locks at their lowest since May 2020. While demand is still up 13% from pre-pandemic levels, rising mortgage rates and loan fees deter buyers. The average mortgage rate reached 4.67% by March's end, contributing to a slowdown in vacation home sales. Additionally, new loan fees from April 1 will add approximately $13,500 to typical home purchases. Primary residence demand is still robust, rising 34% from pre-pandemic levels, indicating a shift in buyer interest.

Positive

• Demand for vacation homes still up 13% from pre-pandemic levels.
• Primary residence mortgage-rate locks are up 34% from pre-pandemic levels.

Negative

• Demand for vacation homes dropped sharply for two straight months.
• Mortgage rates surged to 4.67% by March end, pricing out buyers.
• New loan fees add approximately $13,500 to the cost of purchasing a vacation home.

After last year’s frenzy for vacation homes, buyers are now backing off amid rising mortgage rates and an increase in loan fees for second homes

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — 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 (www.redfin.com), the technology-powered real estate brokerage.

Demand for vacation homes was still up 13% from pre-pandemic levels, but it’s declining after a pandemic-fueled second-home boom last year. Still, Redfin expects demand for second homes to remain above pre-pandemic levels in the future, as remote work is here to stay for many Americans.

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,” said Redfin Deputy Chief Economist Taylor Marr. “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.”

Growth in demand for primary residences outpaced that of second homes for the second month in a row, with mortgage-rate locks for primary homes up 34% from pre-pandemic levels. Demand for primary residences has remained at roughly the same level since June 2020.

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% above pre-pandemic levels in March 2021. Demand declined sharply over the last two months as mortgage rates shot up at their fastest pace in history, reaching 4.67% by the end of March, and some workers started returning to the office.

Another deterrent to demand was the impending rise in loan fees for second-home loans, which increased by about 1% to 4% starting on April 1. The change adds about $13,500 to the cost of purchasing a $400,000 home for the typical vacation-home buyer and will continue to cool interest in vacation homes in the coming months.

To read the full report, including charts and methodology, please visit: https://www.redfin.com/news/second-home-demand-drop-march-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/20220411005226/en/

Redfin Journalist Services:

Erin Osgood, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What is the current demand for vacation homes according to the latest Redfin report?

Demand for vacation homes has declined sharply for two consecutive months, though it remains 13% higher than pre-pandemic levels.

How have mortgage rates affected vacation home purchases?

Mortgage rates reached 4.67% by March's end, significantly impacting buyer interest in vacation homes.

What new fees have impacted second-home buyers as of April 1?

New loan fees have increased by about 1% to 4%, adding approximately $13,500 to the cost of a typical vacation home purchase.

How does the demand for primary residences compare to vacation homes?

Demand for primary residences has outpaced that of vacation homes for the second month in a row, with mortgage-rate locks up 34% from pre-pandemic levels.

What caused the decline in vacation home demand?

The decline is attributed to rising mortgage rates and new loan fees that have made purchasing more expensive.