Based on new data from Redfin, mortgage-rate locks for second homes in the U.S. were down 47% from pre-pandemic levels on a seasonally adjusted basis in August, compared to a 33% decline for primary homes.
August marks the 14th-straight month that second-home demand has hovered at least 30% below pre-pandemic levels, as high housing costs and limited inventory deter would-be buyers. Rate locks for second homes hit a seven-year low in February, dropping to 52% below pre-pandemic levels.
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 80% of rate locks result in purchases.
Demand for second homes is also down from a year ago. Mortgage-rate locks for second homes is down 19% year over year, bigger than the 14% decline for primary homes.
The plunge in mortgage locks for vacation homes comes after they skyrocketed during the pandemic, hitting a peak of 88.5% above pre-pandemic levels in October 2020. Affluent Americans jumped at the chance to snap up second homes with record-low mortgage rates during a time when many of them could work remotely from vacation towns. Demand for primary homes jumped during that time, too, but the increase was much more modest, reaching a peak of 16% above pre-pandemic levels in late 2020.
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: