In September, the demand for second homes was up 60 percent from pre-pandemic levels, according to a recent Redfin report. The report was based on analysis of mortgage-rate lock data from Optimal Blue.
The popularity of vacation homes skyrocketed at the onset of the pandemic. But the surge in demand for second homes started to slow as cities lifted stay-at-home orders, the spring homebuying season ended and the overall housing market began to cool.
A new rule from Fannie Mae probably also contributed to demand slowdown, according to Redfin Deputy Chief Economist Taylor Marr. The government-sponsored mortgage enterprise announced plans in March to limit the number of second-home and investment-property loans it would buy, effectively making it more challenging and expensive for some buyers to take out mortgages on vacation homes.
“The market may have overreacted to the Fannie Mae rule a bit, which would explain why we’ve been seeing demand for second homes bounce back,” Marr said. “Mortgage rates are on the rise as well, which is likely creating a renewed sense of urgency for vacation-home buyers who want to purchase properties before rates climb even further.”
In the middle of September, the Treasury Department and Federal Housing Finance Agency announced that they would remove the Fannie Mae restrictions to boost housing supply. This will likely help keep demand for second homes above pre-pandemic levels for the foreseeable future, Marr said.
Permanent remote work policies may also fuel sustained interest in second homes, Redfin said.