SEATTLE–(BUSINESS WIRE)–(NASDAQ: RDFN) – Demand for vacation homes fell below the pre-pandemic baseline for the first time in two years, with mortgage rate freezes for second homes down 4% from compared to before the pandemic in May, according to a New report by Redfin (www.redfin.com), technology-powered real estate brokerage. That’s down from a revised rate of 3% above pre-pandemic levels a month earlier and 70% above pre-pandemic levels a year earlier.
Demand for second homes is down due to high house prices, mortgage rates that have risen rapidly to nearly 6%, and a declining stock market, all of which are also cooling the rest of the housing market. Another deterrent to second home buyers is the fact that the federal government increased borrowing costs for second homes in April, adding about $13,500 to the cost of buying a $400,000 home.
“Soaring monthly payments, along with higher loan fees, have driven many second home buyers out of the market,” said Redfin deputy chief economist Taylor Marr. “Many potential second home buyers are also deterred by turbulent stock markets, high inflation and fears of recession, and they may be quicker to exit the market because vacation homes are not a necessity like the are the main houses. The downturn in the second home market is expected to continue as long as mortgage rates are high and the stock market crashes.
The drop in demand for vacation homes marks a dramatic change from the second half of 2020 and 2021, when mortgage rate freezes for second homes spiked due to record mortgage rates and the ability to work from n anywhere with remote work. Demand peaked in March 2021, when it was about 90% above pre-pandemic levels.
Interest in vacation homes began to decline sharply in February as mortgage rates began to climb. The average 30-year fixed mortgage rate reached 5.81% in the week ending June 23.
To read the full report, including charts and methodology, please visit: https://www.redfin.com/news/second-home-demand-falls-may-2022.
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