Demand for vacation homes and investment properties fell for the second consecutive month in March. While demand for vacation homes was still up 13% from pre-pandemic levels, it’s declining after a pandemic-fueled second-home boom last year. “The pandemic-driven surge in sales of vacation homes is coming to an end as rates rise at their fastest pace in history, causing some second-home buyers to back off,” said Redfin Deputy Chief Economist Taylor Marr. “When rates and prices shoot up so much that a vacation home starts to look more like a burden than a good investment and a fun place to bring your family on the weekends, a lot of prospective buyers have second thoughts. Plus, some buyers down payments—and their nerves—probably took a hit when the stock market dipped over the last few months.” Another factor in the slip in second home demand is the recent actions by the Federal Housing Finance Agency (FHFA) that targets increases to Fannie Mae and Freddie Mac's upfront fees for certain high balance loans and second home loans, which became effective April 1. The fee for second homes increased by in the 1% to 4% range as of April 1, tacking on an additional $13,500 to the cost of purchasing a $400,000 home for the typical vacation-home buyer. Overall interest in vacation homes skyrocketed in mid-2020 as the pandemic began, as many affluent Americans began working remotely and mortgage rates dropped to record lows, with rate locks for second homes reaching a peak of 88% above pre-pandemic levels in March 2021. Demand declined sharply over the last two months as interest rates shot up at their fastest pace in history, second home prices rose, and some workers started returning to the office.
Source: DSNews