Second home demand accelerated faster than demand for primary homes, which increased by 50 percent in October compared with October 2019, according to Redfin. To determine demand, Redfin analyzed mortgage rate lock data from Optimal Blue, a real estate analytics firm.
Prospective buyers lock in their mortgage rates with a lender to protect themselves against a potential mortgage rate increase while they are searching for a home. A mortgage rate lock-in requires borrowers to specify whether their loan is for their primary residence, a second home or an investment property. According to Redfin’s analysis, approximately 80 percent of all mortgage rate locks result in a home purchase and a closed loan.
Mortgage rates, which have reached record lows more than a dozen times in 2020, according to Freddie Mac’s Primary Mortgage Market Survey, have spurred a buying frenzy for primary residences, second homes and investment homes. Working remotely, virtual learning for children and travel restrictions have all contributed to the skyrocketing demand for second homes, according to Redfin lead economist Taylor Marr. He said at least some of the second homes bought in 2020 will become a primary home if the homeowners continue to work remotely.
Resort towns have seen a spike in sales in recent months, with eight of the top 10 counties with the biggest percentage jump in sales located in vacation locations, according to a recent Redfin report.
For example, sales of homes rose 80 percent in September in El Dorado County, home to part of Lake Tahoe, Calif., compared with September 2019. Sales rose 54 percent in nearby Placer County. Similarly, sales were up 51 percent in Cape Cod, Mass.; 33 percent in Cape May County, N.J., and 27 percent in Palm Springs, Calif. Two counties on the Jersey Shore saw sales increase by 52 percent and 36 percent year over year.
Home prices have risen at a faster pace in seasonal towns, which Redfin defines as places where more than 30 percent of the homes are used for occasional, seasonal or recreational purposes. In seasonal towns, the median sales price grew 21 percent in October compared with October 2019, and it grew 14 percent in nonseasonal towns.
For the full report on second homes, click here.
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