High prices and tighter lending restrictions have begun to curb demand for US secondary homes, according to a Redfin report on Thursday.
The data showed that the number of home buyers using mortgage rates for second homes rose 48.1% in May over the same period in 2020, a significant decrease from previous months. The report also notes that the number of second home mortgages was unusually low in May 2020 due to economic stalls caused by the pandemic, so year-on-year comparisons may be “exaggerated.”
A mortgage lock on a second home – where lenders guarantee the mortgage interest rate for a specified period of time while a buyer searches for a property – has skyrocketed since the shutdown, increasing 110% year on year in June 2020. Growth rates have exceeded 80% for months and are now returning to pre-pandemic levels.
The report says that rising house prices are likely to discourage existing homebuyers, as well as a general slowdown in demand. Potential buyers also return to the office, so they cannot spend as much time in the second home.
“A lot of people who had to look for vacation homes last year have already bought them,” says Daryl Fairweather, chief economist at Redfin, in a report. “The pandemic and teleworking have forced many affluent Americans to move to holiday destinations at least part of the time. But with the opening of offices and the return of life to some semblance of normalcy, people are less and less thinking about running to the beach or the lake. “
Second home mortgage regulations have also become stricter. The new rules require only 7% of total bank or mortgage company loans to be in second homes or investment properties, Redfin said. In addition, in some tourist destinations, it has become more difficult to obtain a loan for the towers where the units could be used as short term rentals.
Redfin collected data from analytics firm Optimal Blue for the report.