Demand For Vacation-Home Mortgages Fell 40% Last Year, Redfin Reports

(Illustration courtesy of Redfin)

Homebuyers took out 90,772 mortgages for second homes in 2023, down 40% from 2022 and down 65% from the pandemic housing boom, according to a new report from Redfin, Seattle.

The report noted mortgages for primary homes fell at half that rate, down 20% year over year in 2023 and down 35% from 2021.

Redfin analyzed Home Mortgage Disclosure Act data covering purchases of second homes, primary homes and investment properties from 2018 to 2023. It found home purchases fell across the board last year due to low inventory, high mortgage rates and high home prices; 2023 was the least affordable year on record.

“Affordability hasn’t improved in 2024; monthly housing costs are at an all-time high,” Redfin said.

The report noted mortgages for second homes dropped more than mortgages for primary homes for several reasons:

It’s more expensive to buy a second home. The typical second home was worth $475,000 in 2023 versus $375,000 for primary homes. Additionally, the federal government increased loan fees for second homes in 2022, upping the total cost of buying one.

Vacation homes aren’t a necessity the way primary homes are, so when housing costs skyrocket, many prospective second-home buyers back off.

Purchasing a second home for your own use is a less attractive proposition than it was a few years ago because many companies are now requiring their employees to return to the office, meaning there’s less time to spend in vacation homes.

“Soaring prices pushed down demand for vacation homes last year, both for cash buyers and those getting a mortgage—but the latter pulled back even more because high rates exacerbated high prices,” Redfin agent Heather Mahmood-Corley said. “There has been a small uptick in interest in second homes this year, mostly from cash buyers who plan to eventually move in full time. People who would need a mortgage are still sitting on the sidelines, waiting for rates to come down—especially because rates are typically even higher for second homes than primary homes.”

Just 3% of all mortgages went to second-home buyers in 2023, down from 5% in 2020, the report said.