Buyers are still on the hunt for a second property or vacation home, but nowhere near as many as during the boom that occurred in the early months of the pandemic.
The number of buyers who locked in mortgage rates for a second home was 19 percent lower in August than the same period last year, according to a report Wednesday from Redfin.
That marks the third consecutive month in which the number of rate locks was lower than the previous year’s mark.
“The pandemic isn’t over, but the desire to escape isn’t as intense as it was before,” Redfin Lead Economist Taylor Marr said in the report. “People are increasingly returning to life as normal, with kids going back to school and cities coming to life again.”
The Seattle-based brokerage uses a database of mortgage-rate locks to track overall interest in second homes, as buyers who go through this process are required to specify whether they’re locking in a rate for a primary home, secondary home or investment property.
The vast majority of locks in the database result in an actual home purchase, Redfin said.
From an early time in the pandemic, the rise of remote work led some wealthier Americans to pursue second-home purchases away from the city.
That number continued to rise through the pandemic’s first winter.
The National Association of Realtors issued a report in June showing that vacation homes made up more than 1 in 15 home purchases in the first four months of 2021, compared to 1 in 20 during 2019.
This coincided with rampant growth in the demand for primary homes as well, meaning that even as the market for primary homes was heating up fast, interest in vacation homes was accelerating even faster.
More than 412,000 vacation homes sold in the first four months of this year, compared to just under 267,000 vacation homes in the same portion of 2019, according to the NAR report.
But as spring rolled into summer, vacation home interest started to die down, Redfin says.
The brokerage’s data team believes this drop is largely a reflection of how abnormally high activity was this time last year. But it may also be related to new lending rules from earlier this year that made it tougher for borrowers to seek riskier loans, such as mortgages for investment properties.
In the Redfin report, Marr said demand for second homes would likely remain higher going forward than it was before the pandemic, even as the home market cools a bit in other areas.
“The housing market as a whole is still booming, just not as strongly as it was in the second half of 2020,” Marr said. “Homebuyer competition, migration and home-sales growth have all slowed.”