Despite the nationwide rollout of COVID-19 vaccinations and a return to life as once was normal, pandemic-driven demand for second homes is soaring, as many remote workers are opting to spend at least part of their time in vacation destinations, even as some companies are planning for workers to return to the office. According to Redfin, the number of home buyers who locked in mortgage rates for second homes shot up a record 128% year-over-year in March, marking the 10th consecutive month of 80%-plus annual growth.
When compared to the start of the pandemic in the U.S., the annual rise in the demand for second homes is nearly quadruple the 34% year-over-year gain for primary homes.
"This recession has driven wealthy and low-income Americans further and further apart, and the soaring demand for vacation homes during the pandemic is a perfect example of their unequal financial footing, with some people buying second homes and others unable to buy their first," said Redfin Chief Economist Daryl Fairweather. "Home prices just keep going up. That's a good thing for Americans who already own one home because they can take advantage of their increased equity to buy other assets, which in some cases includes another home. But it's bad for lower- and middle-class families, particularly those who are renters, because the barrier to homeownership is getting higher and higher."
Interest in vacation homes is on the rise as uneven financial recovery is taking place throughout the U.S.
“Wealthy Americans are likely to have held onto their jobs—many with the freedom to work remotely—and they're earning money through a robust stock market and rising real-estate values,” said the report. “But people in lower income brackets are more likely to work in industries like restaurants, retail and hospitality that are still far from recovered.”
Home prices in seasonal towns, where second homes are often located, are up more than prices in non-seasonal towns. The median sale price for homes in seasonal towns rose 19% year over year in February—the most recent month for which data is available—to $417,000, the eighth straight month of 10%-plus year-over-year growth.
For homes in non-seasonal towns, the median sale price rose 16% to $370,000. For this analysis, a seasonal town is defined as an area where more than 30% of housing is used for seasonal or recreational purposes.
A recent Redfin analysis found that the vacation towns and suburbs heating up the most include El Dorado County, Calif.—an area that spans from the eastern outskirts of Sacramento to the southern part of Lake Tahoe; Santa Cruz County, Calif.—an area in close proximity to both Silicon Valley and San Francisco; Deschutes County, Ore.—home to Bend, Ore.; and Barnstable County, Mass.—home to Cape Cod.
"The Palm Springs housing market is incredibly busy, with an influx of vacation-home buyers from Los Angeles and San Francisco," said Redfin Agent Nisa Sheikh. "Many of them are tech workers who can do their jobs remotely, and they enjoy the weather and lifestyle here in the desert. People don't want to vacation in a hotel room right now, and many of my buyers are planning to turn their second homes into Airbnb rentals and earn some extra income when they're not in town."