Second Homes Are Driving the U.S.'s Covid-19 Housing Boom
Demand for vacation properties is growing twice as fast as demand for primary homes, as affluent Americans look for more space to ride out the pandemic.
Mansion Global: Market Reports
Second-home purchases are driving the surge in U.S. housing activity, punctuating the disconnect between a booming housing market and a battered economy where millions are still out of work.
Demand for second homes doubled in October over a year ago, according to an analysis real estate firm Redfin published on Thursday. Redfin looked at data on mortgage rate lock agreements between home buyers and banks, in which borrowers must specify whether the home they’re buying is primary, secondary or investment. The mortgage lock data was supplied by analytics firm Optimal Blue.
The vast majority of those interest rate lock agreements result in a home purchase, approximately 80%, so they’re a reliable window into home-buying trends.
Before the pandemic, demand for second and primary homes had been growing at similar rates. But since the easing of lockdown restrictions in late spring and early summer, interest in second homes has grown twice as fast as for primary homes.
The surge in second-home buying underscores how affluent Americans, whose white-collar jobs have allowed them to work and school their children from home, have chosen to ride out the pandemic outside of dense urban centers and in homes with more space and amenities. Eight of the 10 hottest counties in the U.S. are vacation spots, including Lake Tahoe, which straddles California and Nevada, Cape Cod, Massachusetts, Palm Springs, California, and the New Jersey shore, according to a previous report from Redfin.
“With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans," said Redfin lead economist Taylor Marr. "Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic."
The U.S. housing market has staged a staggering recovery from the depths of the lockdown lull, when uncertainty weighed on buyers and sellers and restrictions in some states made transactions complicated if not impossible.
Home sales in October surged 24% from a year ago, according to Redfin’s latest figures. The median house price was up more than 14%—a near record gain and a reflection of a market skewed by pricier, bigger homes selling.
Melissa Killham, a Wisconsin-based agent with Redfin, said demand is booming in Lake Geneva, a resort town an hour south of Milwaukee.
"The home-tour rate in Lake Geneva has doubled—people from the city can't travel for vacation so they're looking for second homes," she said, adding that buyers are also attracted to the school district, which is holding in-person classes.
It’s possible, with the country in the grips of another wave of Covid-19 infections that has spurred new restrictions in some states and the holidays approaching, that the appetite for home purchasing could diminish over the short-term, said Daryl Fairweather, Redfin’s chief economist.
“Given that we are entering a winter wave of the pandemic, housing demand will likely lose a bit of steam until 2021, cooling the market from red-hot to just hot,” she said.
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