Is the vacation home boom over? Whether its due to many companies calling employees back to the office or rising loan rates, mortgage-rate locks for second homes are now officially below pre-pandemic levels.
According to Redfin, mortgage-rate locks for second homes were down 4 percent in May. That’s down from a revised rate of 3 percent above pre-pandemic levels a month earlier, and 70 percent above pre-pandemic levels a year earlier.
(“Pre-pandemic levels” are defined as January and February of 2020.)
Back in April, the federal government increased loan fees for second homes, adding $13,500 to the cost of purchasing a $400,000 home.
“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” said Redfin Deputy Chief Economist Taylor Marr. “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. The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”
Demand for second homes peaked in March 2021, when rate locks were about 90 percent above pre-pandemic levels. Interest in vacation homes, however, started declining sharply this past February as mortgage rates began to rise.