The housing market has seen a surge of interest in second homes as, early last year, concerns over the spread of COVID-19 began shutting down the U.S., spurring a migration of Americans from crowded, closed-down cities to the suburbs or even more rural areas.
But no one really knew when the pandemic would end, or when (if ever) they would be expected to head back to the office.
So adding to the already crowded and inventory-starved housing market, many consumers began buying second homes. Over the past year, the number of homebuyers who locked in mortgage rates for second homes shot up a record 128 percent year over year in March, according to a new report from Redfin, a tech-driven real estate brokerage. That marks the 10th straight month of more than 80 percent annual growth.
However, the year-over-year increase should be taken in context because demand for second homes was relatively weak in March 2020, when the coronavirus pandemic first hit the U.S. and real estate activity in many parts of the country temporarily halted with lockdowns.
Pandemic-driven demand for second homes is soaring as many affluent remote workers opt to spend at least part of their time in vacation destinations, even as some companies are planning for workers to return to the office. The annual rise in demand for second homes is nearly quadruple the 34 percent year-over-year gain for primary homes.
“The Palm Springs housing market is incredibly busy, with an influx of vacation-home buyers from Los Angeles and San Francisco,” local Redfin agent Nisa Sheikh said. “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.”
Airbnb put out a recent report revealing new hosts earned $1 billion during the pandemic, and hosts made an average of $7,900 per year. Now, the company is anticipating an early summer surge.
But Redfin stated that the increased interest in second homes also served to highlight the uneven financial recovery.
“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,” Redfin Chief Economist Daryl Fairweather said. “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.”
Home prices in seasonal towns, where these second homes are often located, are up more than home prices in non-seasonal towns. The median sale price for homes in seasonal towns rose 19 percent annually in February to $417,000. That marks the eighth straight month of more than 10 percent year-over-year growth.
For comparison, homes in non-seasonal towns saw the median sale price rise 16 percent to $370,000. For this analysis, a seasonal town is defined as an area where more than 30 percent of housing is used for seasonal or recreational purposes.