Throughout the course of the COVID-19 pandemic, several sources have reported a rise in vacation-home purchases, attributable in varying degrees to remote work trends, a market that favors those with the ability to make cash offers, and the desire for more space and recreation at home in a locked-down country. That yearlong surge might be reversing, if an 11% year-over-year decrease in mortgages on second homes reported by Redfin.com is an indicator of things to come.
"Demand for second homes is dropping back down to earth as many employees return to the workplace this summer," Redfin's Lead Economist Taylor 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—as it did even before the pandemic—but the big second-home boom we've seen over the last year is abating."
This is the first decline since April 2020, Redfin reported, and it follows more than a year of double- and triple-digit increases in mortgage-rate locks for second homes.
Demand for vacation homes remains above pre-pandemic levels, Redfin's data team found—that's true even when accounting for a "somewhat exaggerated" year-over-year growth rate due to soaring demand back in in June of 2020, they say.
The researchers also took into account house-price changes in locations that attract second-residence mortgagors.
The price-growth gap between seasonal and non-seasonal towns shrunk since the height of the pandemic, they report.
Home prices in seasonal towns, where second homes are often located, rose at an annual rate of 28% in June to $468,000. For 12 consecutive months now, year-over-year price growth for homes in these towns has increased by more than 10%.
Part of the shift could be that some mortgagors who own vacation homes have decided to make those homes their primary residence.
"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," said Redfin Chief Economist Daryl Fairweather. "That's one reason why demand for second homes is waning while seasonal areas remain popular."
Fairweather says her own family is one example of the trend.
"Partly because I'm able to work remotely, my family sold our house in Seattle and moved full time to Lake Geneva, Wisconsin to be closer to family and take advantage of its relaxed lifestyle and recreational activities."
Home prices in non-seasonal towns are up an annual 26% to $421,000, narrowing that price-growth gap between seasonal and non-seasonal metros. The discrepancy peaked in September 2020, when prices in seasonal towns increased 22% year over year, versus 13% for non-seasonal locales.
To view the full report, including charts and methodology, visit Redfin.com.