Demand Up 87 Percent From Pre-Pandemic Levels
According to national property broker Redfin, U.S. homebuyer demand for second homes was up 87% from pre-pandemic levels in January 2022. This is the highest level in a year and just shy of the record 90% gain in September 2020.
Demand for second-home mortgages is outpacing demand for primary residences, which was up 42% from pre-pandemic levels in January. Redfin's report uses residential mortgage-rate lock data to measure demand.
Interest in second homes started skyrocketing in mid-2020 as affluent Americans took advantage of remote work and low mortgage rates to escape to and invest in vacation destinations. Demand declined last spring--though it remained well above pre-pandemic levels--before bouncing back in the fall.
"Demand for second homes was strong in January as buyers tried to lock in relatively low mortgage payments," said Redfin Deputy Chief Economist Taylor Marr. "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. While I expect demand for second homes to remain higher than it was before the pandemic, mostly because of remote work, it may fall slightly in the coming year as mortgage rates continue to go up and fees for second-home loans increase."
Redfin economists predict that the average 30-year fixed mortgage rate will rise to 3.9% over the course of 2022.
Home prices in seasonal towns up 20%, outpacing non-seasonal towns
Home prices in seasonal towns-where second homes are often located-are up more than prices in non-seasonal towns. The typical home in a seasonal town sold for $501,000 in December-the most recent month for which data is available-a 20% year-over-year increase. That marks 18 straight months of double-digit price growth.
In non-seasonal towns, the median sale price rose 13% year over year to $408,000. For this analysis, a seasonal town is defined as an area where more than 30% of housing is used for seasonal or recreational purposes according to the 2019 Census.
Meanwhile, the number of homes for sale in seasonal towns was down 29% year over year in the fourth quarter, versus a 16% decline in non-seasonal towns. Demand from second-home buyers is likely contributing to the comparatively stronger price growth and tighter inventory in seasonal towns.