Thursday, 13 May 2021 -
Redfin, the National Brokerage, reports today that US homebuyers who kept up with mortgage payments for second homes rose to 178% this year. This represents the 12th straight month we have had an 80% plus growth rate.
The number of vacationers who kept working in holiday destinations was at an all-time peak in April 2021 for the second year in a row when the US economy was heavily hit by the second wave of the pandemic and all real estate activity virtually ground to none. However, second home mortgage rates are still locked in at more than double what it was before the eve of the pandemic. The situation has partly been exaggerated by the volatility of the pandemic, which has seen demand for both primary homes, second homes, and investment properties spike.
However, the record increase in demand for second homes is reported to be double that for primary homes. That’s because the extra motivation to keep up with the payments for primary homes has more or less taken a hit during the pandemic as travel restrictions have been in place for both local and international destinations. As a result, buyers who locked in mortgage rates for second homes was 178% whereas mortgage rate locks for primary homes have risen to 78% year over year in May.
Redfin's report uses data obtained from Optimal Blue, which is a real estate analytic firm that monitors mortgage rate locks for homes and investment properties. Further data from Redfin today Thursday indicate a sharp rise in demand for vacation homes, which represents the fourth month in a row the demand has remained elevated.
Second-Home Demand Drivers
The demand has been driven by both the middle class and the wealthy Americans who have enjoyed a substantial amount of freedom working remotely and making a living from trading stocks as well the rising value of home and investment properties. This is expected to be sustained for the next foreseeable future as most Americans plan to keep working remotely, despite the reopening efforts.
Remote work has turned into the new normal. This, coupled with the low mortgage rates is anticipated to create a driving demand for vacation homes from wealthy Americans. This, however, will only be a given as long as the economy continues to grow.
The Redfin report is further evidence as to the social inequality in the US. That is, some buyers have shown the capacity to own second homes while other Americans have been unable to own homes at all. Nonetheless, the demand for a second home isn't slowing anytime soon.
Residential House Prices Are Up
Seasonal towns in the US, which are ideal locations for second homes, have seen home prices rise by 27% in May to $455,000. Home prices are also up in the so-called non-seasonal cities by 28% to $420,000. These increases are however marginally inflated due to the slow price growth witnessed in the recent pandemic-related economic lockdowns.