Vacation homes have emerged as a hot commodity ever since the pandemic began. As more employees find greater flexibility in working remotely, many are choosing to take on a second residence.
Demand for vacation homes was up 77% from pre-pandemic levels in December, Redfin reports. “The wealthy are still flush with cash and have access to cheap debt, which is why second-home purchases remain far above pre-pandemic levels,” says Daryl Fairweather, Redfin’s chief economist. “While interest in second homes is stabilizing after the big boom in the second half of 2020 and the beginning of 2021, I expect demand to remain high well into this year. Remote work isn’t going anywhere, and mortgage rates are still quite low.”
The vacation-home market boomed in 2021 and likely will continue to do so, says Lawrence Yun, chief economist at the National Association of REALTORS®.
The real estate industry is closely watching whether the Federal Housing Finance Agency’s move this week to raise fees on high-balance second-home loans has any impact on the market. The FHFA announced it would be increasing upfront fees on second-home mortgages and on mortgages that finance homes with balances that exceed standard conforming loan limits. The fees are expected to increase the purchase cost of second homes and homes in high-cost areas. The new fees from Fannie Mae and Freddie Mac will take effect on April 1.
For now, the second-home market appears to remain strong, especially in nontraditional destination cities far from coastlines or mountains, which aren’t typically popular second-home markets. In the fall of 2021, Hippo, a homeowners insurance firm, analyzed median home costs, average home insurance premiums, property value gains, crime rates, and more to identify the second-home markets with the best investment potential. They found unexpected second-home hot spots in places like El Paso, Texas; Fort Wayne, Ind.; Glendale, Ariz.; and Newark, N.J. View a breakdown of popular second home areas across all four major regions.
Source: “Demand for Vacation Homes Up 77% From Pre-Pandemic in December,” Redfin (Jan. 6, 2022)