Second homes, like the rest of the housing market, were on the rise during the pandemic. Overall, their appeal is largely twofold: people buy them for pleasure and / or to work from home in a comfortable place, and / or as an investment to rent to others when you are not there yourself .
Now there is a new report pointing to some cooling of this segment of the housing market in our fair country.
Red fins (NASDAQ: RDFN) said on a recent blog that “demand for second homes was down 21% year-over-year in July, the second straight month of annual declines in mortgage hold-ups. This followed 13 months of increasing activity in buying second homes. “
Setting a course in a market that is slowing down slightly
Tracking mortgage locks – where a lender guarantees an interest rate for a set period of time, such as 30 or 45 days – is a great way to measure market activity, as each one indicates that the buyer and seller are likely to have made a deal.
The buyer must tell the lender whether the mortgage loan is a first home, a second home, or an investment property such as a rental. Redfin says that about 80% of all mortgage locks result in an actual purchase, so a decrease in those locks indicates a decrease in sales.
In fact, similar performance has recently been seen on other metrics such as sales of newly built homes. And Redfin reported last week that while the national average home sale price was a record $ 362,750, that measurement actually remained unchanged for the four-week period ending July 25, the first time since early March.
The listing service also said that mortgage lockdown data showed that demand for primary home purchases fell 4% year over year in July pandemic lockdowns.
The millionacres bottom line
High prices are likely the cause of a decrease in mortgage lockdowns and in both new and existing home sales, as affordability issues affect the second home market as much as they do for first homes.
Slowing down is not a standstill, especially in this new normal. The market is still far ahead of the previous year, and indeed many years ago, so that declining growth rates do not point to a slump. Second homes are no exception.
“Demand for second homes is still well above pre-pandemic levels, and we can expect the high level of interest in vacation homes to continue into the new era of remote working,” Redfin chief economist Taylor Marr said on this week’s blog. “If you build it – in the midst of a historic housing shortage – they will come. I assume that vacation homes will remain popular as more houses are built. “
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