Second-home demand fell 19.3% annually in August, according to a report from Redfin analyzing mortgage rate lock data.
It’s the third consecutive month that demand for second homes has decreased year over year, after a drops of 21.0% in July and 11.1% in June. Before that, demand rose for 13 months as affluent Americans, using earnings buoyed by rising home values, sought to elude density during the pandemic. Many took advantage of remote work flexibilities and low mortgage rates to scoop up vacation homes at an elevated pace, with demand for second homes surging as high as 172% in April.
But with home prices remaining solidly on the uptick and some employers beginning to rethink their remote work policies, that trend appears to have subsided. The reversal was influenced at least somewhat by controversial revisions to the preferred stock purchase agreements of Fannie Mae and Freddie Mac that limited their buys of second-home loans. It remains to be seen how the recent suspension of those revision by the Biden administration will affect vacation-home buying activity moving forward.
Second-home demand does remain above pre-pandemic levels, and with many shifting to permanently working from home even with employers calling for more onsite labor, it will likely stay heightened, according to Taylor Marr, Redfin’s lead economist.
“The pandemic isn’t over, but the desire to escape isn’t as intense as it was before. People are increasingly returning to life as normal, with kids going back to school and cities coming to life again,” said Marr. “The housing market as a whole is still booming, just not as strongly as it was in the second half of 2020. Homebuyer competition, migration and home-sales growth have all slowed.”
Demand for primary homes also retreated in August, Redfin reported, slipping 1% — the second straight month of primary-home demand declines. Redfin noted that, while the headline drop in demand for second homes is much more pronounced than that of primary homes, that’s largely because of the significant jump in demand for second homes one year ago.