Redfin: Demand for Vacation Homes Falls Below Pre-Pandemic Levels

Photo credit: AirBnB

Redfin, Seattle, said demand for vacation homes has fallen below the pre-pandemic baseline for the first time in two years, with mortgage-rate locks for second homes down 4 percent from before the pandemic in May.

That figure is down from a revised rate of 3 percent above pre-pandemic levels a month earlier and 70 percent above pre-pandemic levels a year earlier.

Demand for second homes is declining due to high home prices, mortgage rates that have rapidly risen to nearly 6 percent and a slumping stock market–factors that are also cooling the rest of the housing market. Another deterrent to second-home buyers is the fact that the federal government increased loan fees for second homes in April, adding $13,500 to the cost of purchasing a $400,000 home.

“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” said Redfin Deputy Chief Economist Taylor Marr. “Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are.”

Marr said the cooldown in the second-home market will likely continue as long as mortgage rates are elevated and the stock market is slumping.