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Mortgage demand for second-home purchases is outpacing that for primary residences, according to a new report from Redfin that factored in residential mortgage rate lock data. Homebuyer demand for second homes in January was 87% higher than prepandemic levels, according to Redfin’s research.
The National Association of REALTORS® also reports strong demand for second homes. NAR Chief Economist Lawrence Yun called vacation homes “a hot commodity” last summer, when vacation-home sales had jumped 57% year over year compared to 20% for existing homes, according to NAR’s 2021 Vacation Home Counties Report.
Home prices in seasonal towns were up 20% in January, outpacing non-seasonal towns (13% annually), according to Redfin’s data. Further, the number of homes for sale in seasonal towns fell 29% in the fourth quarter compared to a year earlier. The high buyer demand is leading to leaner inventories and higher home prices.
“Demand for second homes was strong in January as buyers tried to lock in relatively low mortgage payments,” says Taylor Marr, Redfin’s deputy chief economist. “Mortgage rates surpassed 3.5% in January for the first time since March 2020, encouraging buyers who were on the fence about purchasing a vacation home to commit before rates increase further.”
Marr predicts that demand for second homes will remain higher than prior to the pandemic, but it may fall slightly over the coming year due to rising mortgage rates and increasing fees for second homes.