The number of people locking in mortgage rates for second homes has jumped as remote work enables affluent Americans to escape city life during the pandemic. At the same time, millions of families are suffering as businesses shutter and unemployment skyrockets.
Sales of vacation homes are soaring, even as millions of Americans grapple with financial devastation triggered by the coronavirus pandemic. In October, demand for second homes skyrocketed 100% from a year earlier—the fourth triple-digit increase in the last five months. That outpaced the 50% increase in demand for primary homes.
This is according to a Redfin analysis of mortgage-rate lock data from real estate analytics firm Optimal Blue. A mortgage-rate lock is an agreement between a homebuyer and a lender that allows the homebuyer to lock in an interest rate on a mortgage for a certain period of time, offering protection against future interest-rate hikes. Homebuyers must specify whether they are applying to secure a mortgage rate for a primary home, a second home or an investment property. Roughly 80% of mortgage-rate locks result in actual home purchases.
Home sales are on the rise across the board due to record-low mortgage rates and a wave of relocations during the pandemic, but demand for second homes is particularly strong as affluent Americans work remotely, no longer need to send their kids to school in person and face travel restrictions, explained Redfin lead economist Taylor Marr.
“With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans,” Marr said. “Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic.”
Some second homes purchased this year will ultimately become primary homes, as it’s not uncommon for a buyer to close a deal on a second home before putting their current house on the market, Marr added.
As second-home purchases have soared during the pandemic, resort towns across the U.S. have attracted more homebuyers. A recent Redfin report found that eight of the 10 U.S. counties that have heated up the most over the past year are home to popular vacation spots, including Lake Tahoe, Cape Cod, Palm Springs, the Jersey Shore, and Bend, OR.
“The home-tour rate in Lake Geneva has doubled—people from the city can’t travel for vacation so they’re looking for second homes,” she said. “The Lake Geneva school district is also still offering in-person learning, so a lot of families are buying second homes in the area so they can work remotely and send their kids to school.”
Home values have been climbing in seasonal towns across the U.S. The median sale price in seasonal towns grew 21% year over year in October to $420,000, outpacing the 14% growth in non-seasonal towns. We define a seasonal town as a town where more than 30% of the housing stock is used for seasonal, recreational or occasional purposes.
“Even when offices reopen, folks will be able to spend more time than ever before in their second homes because many employers will continue to offer flexible remote-work policies,” Marr said.“With workers still commuting in one or two days a week, resort towns that are near major cities will likely continue to heat up.”