Demand for vacation homes has surged as Americans who can work from anywhere look to escape big cities and tap ultra low mortgage rates.
The market for second homes is even hotter than it is for primary residences, with demand for mortgages on vacation digs rising 84% year-over-year in January, compared with 36% for primary residences, according to an analysis of mortgage rate-lock data by real estate firm Redfin. In fact, by this measure of mortgage applications, interest in second homes has surged more than 80% for eight straight months, when comparing to the same month a year earlier. At their peak in September, applications surged 118%.
With the pandemic shuttering offices around the country, white-collar workers can do their jobs remotely. And interest rates, averaging 2.73% for a 30-year fixed mortgage last week, remain near all-time lows as the Federal Reserve attempts to pump energy into the slumping U.S. economy.
The demand for second homes underscores how the pandemic-driven recession has not affected everyone the same way, Redfin said. Many high-earners have seen their wealth grow as home values and stock markets soar, while lower-income Americans continue to suffer from historic job losses.
In a separate analysis in December, Redfin found the largest growth in interest in homes located in vacation destinations like Lake Tahoe and in the Lakes Region of New Hampshire.
The hottest neighborhoods in 2020, according to Redfin, were all located within driving distance of New York City, Boston, Philadelphia, San Francisco or Los Angeles. Most of the areas saw double-digit growth in home sales and housing values in 2020.
Under a mortgage-rate lock—an agreement in which homebuyers can lock in an interest rate for a certain period of time—customers must specify whether they are applying for a primary home, a second home, or an investment property. Redfin, which analyzed mortgage-rate lock data from real estate analytics firm Optimal Blue, said about 80% of mortgage-rate locks result in actual home purchases.