Demand for Second Homes Continued to Cool in May

According to Redfin, the Seattle-based technology-powered real estate brokerage company, the number of buyers who locked in mortgage rates to purchase a second home nationwide rose 48% year-over-year in May. While that is a lofty number, it is the first time in a year that annual growth rate fell below 80%. There are several reasons for the cooling in the demand for second homes this spring. High prices and the typical slowdown in overall pending homes sales are negatively influencing vacation homes sales. Additionally, mortgage-lending rules for second homes tightened in April and May. Under new federal rules, second home and investment property mortgages can make up just 7% of a lender’s total pipeline. That’s on top of regulations that make it difficult to get a loan for condo towers in resort areas that may be used as short-term rentals.

In comments prepared for the release of this information, Daryl Fairweather, Redfin’s Chief Economist said, “In addition to tighter lending rules, vacation-home buyers are starting to react to rising prices. Home prices have been climbing rapidly for the last several months, and it seems they’ve finally gotten prohibitively high for some people searching for second homes. Vacation-home buyers are quicker to back away from properties that are potentially overpriced because they’re not a necessity. People searching for primary residences may have to shell out more money than they want to because they need a roof over their heads.”