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Demand for vacation homes has slipped below its pre-pandemic levels for the first time in more than two years as high home prices and mortgage rates deter buyers, according to data released Friday by Redfin.
Mortgage locks for second homes fell 4 percent from pre-pandemic levels in May, according to Redfin as mortgage rates rise to nearly 6 percent and the once red hot housing market continues to cool. Also deterring buyers has been the federal government’s decision to increase the cost of loans on second homes, adding approximately $13,500 to a home with a price tag of $400,000.
“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” Redfin Deputy Chief Economist Taylor Marr said in a statement.
The shaky state of the economy is also likely a deterrent to many buyers, Marr added.
“Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation, and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are,” he said. “The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”
The drop in demand for second homes marks a dramatic change of pace from the first two years of the pandemic when vacation homes saw some of their highest demand ever due to the lasting popularity of remote work, with white-collar workers finding themselves untethered from offices with the freedom to work from off the grid locations. Demand peaked in March 2021 when it was about 90 percent above pre-pandemic levels, then started to decline sharply in February when mortgage rates began their ascent above five percent.