Demand for vacation homes started off 2022 strong, reaching its highest level in a year in January.
Homebuyer demand for second homes was up 87% from pre-pandemic levels in January, just shy of the record 90% gain seen in September 2020 and well above the 42% increase in demand for primary residences, according to a report from Redfin released on Thursday.
The report analyzed residential mortgage-rate lock data to measure demand levels.
“Demand for second homes was strong in January as buyers tried to lock in relatively low mortgage payments,” Redfin deputy chief economist Taylor Marr said in a statement. “Mortgage rates surpassed 3.5% in January for the first time since March 2020, encouraging buyers who were on the fence about purchasing a vacation home to commit before rates increase further. While I expect demand for second homes to remain higher than it was before the pandemic, mostly because of remote work, it may fall slightly in the coming year as mortgage rates continue to go up and fees for second-home loans increase.”
Interest in second homes skyrocketed in mid-2020 as affluent Americans took advantage of increased remote work flexibility and low mortgage rates to invest in properties in vacation destinations. Demand dipped last spring, although it remained above pre-pandemic levels, before rising again in the fall.
Reflecting this higher-level demand is home prices. In December, homes in seasonal towns, which Redfin defined as “an area where more than 30% of housing is used for seasonal or recreational purposes according to the 2019 Census,” saw prices rise 20% year-over-year, with typical homes recording a sold price of $501,000. On the other hand, in non-seasonal towns, the median sale price rose 13% year over year to $408,000.
Similarly to market conditions across the country, inventory of homes in seasonal towns is down. During the fourth quarter inventory in season towns was down 29% year over year, compared to a 16% decline in non-seasonal towns. According to Redfin, the heightened level of demand is most-likely contributing to the comparatively stronger price growth and tighter inventory in seasonal towns.
