According to national property broker Redfin, mortgage-rate locks for second homes in the U.S. were down 52% from pre-pandemic levels on a seasonally adjusted basis in March 2023. That is compared to a 13% decline for primary homes.
Second-home rate locks fell to their lowest level since 2016 in February and remained nearly as low in March.
The drop in second-home demand follows a meteoric rise during the pandemic homebuying boom. Mortgage-rate locks for second homes reached a peak of 89% above pre-pandemic levels in August 2020. At that time, many affluent Americans bought homes in vacation destinations, encouraged by low mortgage rates, remote work, and limitations on traveling from place to place.
Redfin reports a variety of factors are causing the outsized drop in second-home demand:
Second-home buyers are deterred by high rates, newly instituted loan fees, slowing rental market
A scarcity of new listings, elevated mortgage rates, still-high home prices and persistent inflation, among other economic woes, are holding back demand for both primary and second homes."With housing payments near their all-time high; a lot of people can't afford to buy one home right now, let alone a second," said Redfin Deputy Chief Economist Taylor Marr. "Add the recent increase in loan fees, inflation, shaky financial markets, the end of pandemic-related financial stimulus and many companies calling workers back to the office, and it's simply a challenging time for most Americans to buy a vacation home."
But there are still some second-home buyers out there, especially in popular vacation destinations. Phoenix Redfin agent Van Welborn said some buyers are looking for vacation condos, especially in desirable neighborhoods.
"It's mostly affluent cash buyers who don't have to worry about high rates," Welborn said. "They're motivated to buy now because they think they can get a vacation home for under asking price-and in some cases, they're right. There are fewer buyers looking to buy properties to be used as short-term rentals, though, as they're finding that the market is saturated."