For the first time in two years, demand for vacation homes has fallen below pre-pandemic levels, as still-rising home prices combined with higher interest rates have halted the rush.

Redfin reported that rate locks for second homes were down 4% in May 2022 compared to their pre-pandemic baseline. In April, locks were 3% above pre-pandemic levels, while in May 2021, locks were a staggering 70% above the pre-pandemic watermark. Redfin defines “pre-pandemic levels” as the typical amount of locks seen between January and February 2020, before the majority of COVID-related lockdowns and restrictions first took effect.

Demand hit a high in March of last year, when locks were 89% above pre-pandemic levels.

Headwinds that have slowed the entire residential housing market are taking a particularly large toll on vacation homes. Vacation-home demand began to see a sharp tumble in February 2022, when mortgage rates began to sharply rise.

Exacerbating the slowdown is an increase in mortgage fees for second homes imposed by the federal government in April. The added fees tacked on approximately $13,500 to the cost of purchasing a $400,000 home, Redfin reported.

“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” said Taylor Marr, Redfin’s deputy chief economist. “Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are.

“The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”