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Demand for vacation homes is rising at a record pace, despite the gradual reopening of offices across the country, according to a new report from real-estate brokerage Redfin.
Rate locks have risen 178% for second homes over the past year as of April, according to an analysis by Redfin. That’s compared with just a 78% increase for primary homes.
When a home buyer works with a lender to lock in a specific interest rate they must specify whether the home is intended as their primary dwelling, as a second home or as an investment property.
Around 80% of rate locks lead to an actual home purchase, according to Redfin.
Researchers at Redfin /zigman2/quotes/203726414/composite RDFN +1.77% analyzed mortgage-rate lock data from Optimal Blue, a real-estate analytics company.
The report does, to an extent, reflect the temporary slowdown in real-estate activity triggered by economic shutdowns across the country right as the COVID-19 pandemic became a serious concern in the U.S.
Still, April marked the 11th consecutive month in which rate-lock activity had risen at least 80% over the past year.
Rise in remote work
Teleworkers may be helping to drive this market, but they are also an exclusive bunch, according to Labor Department data released Friday. Just 18.3% of employed people were “teleworking” in April, down from 21% the previous month, the government said.
The rise of remote work for people in white-collar positions meant that families could leave major cities and set up shop in smaller, more remote towns to do their jobs.
That source of demand for second homes remains, even as offices have begun opening up again, particularly because wealthier families will likely have more opportunity to do their jobs remotely for the foreseeable future.
“The combination of the wealthy becoming wealthier, remote work turning into the new normal and low mortgage rates is creating an ideal environment for affluent Americans to buy vacation homes,” Redfin chief economist Daryl Fairweather said in the report.
“As long as the economy continues to grow, I don’t foresee demand for second homes slowing down anytime soon,” she added.
Fortunes have seriously turned around for vacation-home markets since the beginning of the coronavirus crisis.
Last May, Redfin CEO Glenn Kelman said that those markets were “toast” because of the slowdown in travel caused by the pandemic. “Investors who own Airbnb properties are looking for immediate liquidity,” Kelman said at the time, noting how vacation-home owners often relied upon income from Airbnb /zigman2/quotes/222990650/composite ABNB +1.59% and other short-term rental sites to cover the cost of their mortgage.
But as travel started to resume last summer, albeit at a slower pace, many Americans opted to stay in short-term rentals instead of hotels . Rightly or wrong, many travelers perceived Airbnbs to be safer from a health perspective.
Home prices in seasonal towns, where many vacation properties are located, have more than recovered in this time. Over the past year, prices in these towns have risen 27% as of April to a median price of $450,000 — though the year-over-year comparison was skewed in part by the effects of the pandemic’s onset in 2020.
Prices in non-seasonal towns have increased by a similar amount (28%), but these markets also saw a bigger drop in prices last year.