For the first time in a year, the number of buyers who locked in mortgage rates to purchase a second home fell in June. Per a recent Redfin study, second home mortgages saw a year-over-year decrease of 11.1%. Home prices in seasonal towns, meanwhile, rose 28% year over year to $468,000 in June.
The dip in vacation home mortgages is the first such decline since April 2020, following more than a year of double- and triple-digit increases in mortgage-rate locks for second homes, according to Taylor Marr, Redfin lead economist.
Blame a national re-opening of workplaces for that, Marr said.
“Demand for second homes is dropping back down to earth as many employees return to the workplace this summer,” Marr said. “That return to the office, along with soaring prices and tighter lending standards for second homes, is shifting homebuyer demand in favor of primary residences. The allure of owning a vacation home outside the city still exists, but the big second-home boom we’ve seen over the last year is abating.”
Between February 2020 and February 2021, demand for vacation homes rose a staggering 84% — more than double the demand for a primary home. February 2021 marked the eighth consecutive month with at least 80% year-over-year increases, including a peak of 118% year-over-year in September 2020.
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Redfin Chief Economist Daryl Fairweather added that the price-growth gap between seasonal and non-seasonal towns has narrowed since the height of the pandemic, with homes in non-seasonal towns up 26% year over year to $421,000.
“With workplaces making their remote work policies permanent and employees feeling more confident making long-term decisions, many Americans are moving full time to scenic vacation towns rather than purchasing second homes,” Fairweather said. “That’s one reason why demand for second homes is waning, while seasonal areas remain popular.”
Agents began reporting bidding wars for luxury and vacation homes as early as last summer. July 2020 showings in Summit County, Colorado, for example, were up 92% over 2019. Summit County includes popular tourist and vacation destinations Breckenridge and Keystone. Jackson Hole, Wyoming, became a popular summer destination as well, with 46% of homes listed above $1.5 million receiving multiple bids last summer.
A seasonal town is defined by Redfin as an area where more than 30% of housing is used for seasonal or recreational purposes, Fairweather said.
Seasonal town popularity continued into the third quarter of 2020, when some of the country’s popular vacation areas began reporting high year-over-year increases in population. Home sales in the Hamptons shot up 51% in the third quarter; contracts for homes in Palm Beach rose 62%; and skiing destinations like Aspen, Colorado, saw an uptick in children’s school enrollments.
But the exodus to vacation towns by affluent Americans shows how uneven some of the recovery has been, Marr said.
“It’s representative of the K-shaped economic recovery from the pandemic-driven recession,” Marr said. “Many well-off remote workers are able to follow their dreams and purchase second homes, but it has become even more difficult for many lower-income people to buy a primary residence as home values rise and the recession disproportionately impacts employees in the service sector.”