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Drastically fewer Americans bought vacation homes in 2023 compared to the year before as elevated mortgage rates made the prospect of a second home a luxury few could afford, according to a new report.
United States homebuyers took out 90,772 mortgages for second homes in 2023 — 40 percent fewer than they did in 2022 and 65 percent fewer than they did during the height of the pandemic housing boom in 2021, according to the report released Monday by Redfin.
Mortgage applications for primary homes fell at half the rate of those for secondary homes. They were down 20 percent annually from 2023 and down 35 percent from 2021, according to the report.
Vacation homes are already a luxury product, and are typically more expensive than a primary home regardless of interest rates, according to the report, with the typical second home worth $475,000 in 2023 compared to $375,000 for a primary home.
While prices are rising, the prospect of owning a vacation home has become less attractive than it was during the pandemic as many workplaces require in-person work, meaning homeowners have less time to spend in their vacation home. Additionally, the prospect of renting a vacation property out has become less attractive as the rental market cools from its pandemic peak and Airbnb hosts make less money than they did during the pandemic.
Those who did purchase vacation homes in 2023 were — unsurprisingly — wealthy, with 86 percent of second home mortgages issued to high-income buyers. They were also overwhelmingly white, with 79 percent of vacation homes going to white buyers while 6.4 percent went to Asian buyers, 6.2 percent to Hispanic buyers and 2.7 percent to Black buyers.
Demand for vacation homes has continued to drop in 2024 according to the report, with mortgage rate locks for second homes down 7.3 percent in April from a year earlier, according to a Redfin analysis of Optimal Blue data.
“Soaring prices pushed down demand for vacation homes last year, both for cash buyers and those getting a mortgage — but the latter pulled back even more because high rates exacerbated high prices,” Phoenix Redfin Premier agent Heather Mahmood-Corley said in a statement.
“There has been a small uptick in interest in second homes this year, mostly from cash buyers who plan to eventually move in full time. People who would need a mortgage are still sitting on the sidelines, waiting for rates to come down — especially because rates are typically even higher for second homes than primary homes.”
