Demand for second homes fell 21 percent year-over-year in July, according to a recent Redfin report. It was the second consecutive month of annual declines in mortgage-purchase locks, following 13 months of surging activity in second-home purchases. Demand for primary home purchases also fell, by 4 percent year-over-year.
July marked the first time the growth rate for second-home demand fell behind that of primary homes since April 2020. This is likely because soaring home prices caused some prospective second-home buyers to reconsider their plans, according to Redfin. As of June, home prices were up 25 percent to record highs but have since begun to flatten.
“Demand for second homes remains well above pre-pandemic levels, and we can expect the high level of interest in vacation homes to persist in the new era of remote work,” Redfin Lead Economist Taylor Marr said in a release. “Builders have responded to this increased interest by putting more resources into building homes and less into hotels and lodging. If you build it, amid an historic housing shortage, they will come. I expect vacation homes to remain popular as more homes are built.”
The report is based on a Redfin analysis of mortgage-rate lock data for home purchases 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, offering protection against future interest-rate hikes. Around 80 percent of mortgage-rate locks result in home purchases.