Is this the death of the second house? U.S. vacation home sales are down three-quarters from pandemic peak as rising mortgage rates deter buyers
Vacation home sales are down three-quarters from their pandemic highs as rising interest rates and limited housing inventory deter potential buyers.
About 16 percent of existing home sales are now going to vacation homes, compared to a peak of 22 percent in January 2022, data from the National Association of Real Estate Agents (NAR) show. From the end of 2015 to the first half of 2020, this figure remains above the average of 14%.
And a report from mortgage service provider Optimal Blue, cited by Reuters shows that home sales in the tourist hotspots of Hilton Head Island, South Carolina, and Lake Havasu City, Arizona, have essentially dried up this year. Across the board, holiday home sales have fallen by 75%.
Second home ownership skyrocketed during the pandemic as wealthy city dwellers bought additional properties in idyllic areas to cope with lockdown. The widespread shift to working from home also disconnected workers from their urban offices.
In October 2020, the number of Americans purchasing a second home doubled from the same month a year earlier – according to data from Redfin.
Second home ownership skyrocketed during the pandemic as wealthy city dwellers bought additional properties in idyllic areas to cope with lockdown. But figures show that the trend is declining
But several indexes suggest the trend is declining.
According to Hilton Head Island and Lake Havasu City, sales volumes fell 83 percent and 87 percent, respectively Optimal Blue.
Experts say the trend is driven by a widespread housing shortage.
Chuck Tuttle, vice president of sales at William Raveis Real Estate on Cape Cod, shared Reuters: ‘Housing is simply not available.
‘If quality second homes come onto the market and they are prepared and presented correctly, they will go quite quickly, regardless of the price.’
The problem has been exacerbated by rising mortgage rates, which are causing the cost of homeownership to skyrocket.
Optimal Blue Figures show that holiday home purchases peaked in the third quarter of 2020, when mortgage interest rates were around 3 percent.
The problem has been exacerbated by rising mortgage rates, which are causing the cost of homeownership to skyrocket
Homebuyers today have to pay $500,000 more for a 30-year mortgage than they would have two years ago after interest rates rose to 8 percent
But the Federal Reserve’s struggle to curb inflation has sent interest rates soaring to their highest level in two decades.
Data from government-backed lender Freddie Mac shows that the average interest rate on a 30-year loan is now 7.79 percent.
Falling demand for holiday homes is having a knock-on effect on home contractors in tourist hotspots.
Tim Allen, owner of Kopa Home Services in Flagstaff, Arizona, said, “Services for existing rentals have grown, but services for converting larger tickets to new vacation rentals have ceased.
“I can’t remember any major project or preparation we did this year for a new vacation rental owner.”