Second-home mortgage demand plunged in 2023, slashed by low supply, elevated mortgage rates and high prices, according to new figures from Redfin.
The real estate brokerage reported 90,772 second-home loans last year, down 40% annually and 65% from the peak of the pandemic-era housing boom in 2021. All mortgages saw a sizeable dip, but loans for primary homes decreased 20% year over year — half the rate of the second-home mortgage slippage.
“Soaring prices pushed down demand for vacation homes last year, both for cash buyers and those getting a mortgage — but the latter pulled back even more because high rates exacerbated high prices,” said Phoenix Redfin Premier agent Heather Mahmood-Corley. “There has been a small uptick in interest in second homes this year, mostly from cash buyers who plan to eventually move in full time. People who would need a mortgage are still sitting on the sidelines, waiting for rates to come down — especially because rates are typically even higher for second homes than primary homes.”
Unsurprisingly, high-income households comprised the vast majority (86%, or nearly nine in 10) of second-home buyers last year. Just under 3% went to low-income purchasers. (For context, the nationwide median income of high-income buyers in the HMDA data was $178,000, while the median for low-income buyers was $65,000.)
Second-home market share also dropped. Just 2.8% of total mortgage originations in 2023 were for second homes or vacation homes, continuing to trend down from 5.1% in 2021 and 3.6% in 2022.
Don’t expect the trend to reverse this year. Per Redfin analysis of early Optimal Blue data, rate locks for second homes have hovered near the lowest level in eight years since the start of 2024. In April, rate locks for second homes sank by 7.3% annually in April. Compare that to rate locks for owner-occupied homes, which also dropped, but only by 1.6% year over year.
