In 2023, U.S. home buyers applied for 90,772 mortgage loans for their second homes, a 40% decrease from 2022.
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Far fewer Americans will buy vacation homes in 2023 than the year before, as rising mortgage rates make second homes an affordable luxury for a few, a new report shows.
A report released by Redfin on Monday showed that U.S. homebuyers took out 90,772 mortgages for second homes in 2023, which was 40% less than in 2022 and 65% less than during the 2021 pandemic housing boom.
Mortgage applications for primary homes fell half as much as those for secondary homes. That’s a 20% annual decline compared to 2023 and a 35% annual decline compared to 2021, the report said.
Vacation homes are already a luxury item and are typically more expensive than primary homes regardless of interest rates, with the typical value of a second home at $475,000 in 2023 compared to $375,000 for a primary home, the report said.
Despite rising prices, the prospect of owning a vacation home has become less attractive than during the pandemic, as many workplaces require in-person work, meaning homeowners spend less time in their vacation homes. Additionally, as the rental market cools from the peak of the pandemic and Airbnb hosts are making less than they were during the pandemic, the prospect of renting out vacation properties becomes less attractive.
Unsurprisingly, those buying vacation homes in 2023 are wealthy, with 86% of second home mortgages going to high-income buyers. They are also overwhelmingly white, with 79% of vacation home buyers identifying as white, 6.4% identifying as Asian, 6.2% identifying as Hispanic and 2.7% identifying as black.
Reports show demand for vacation homes continues to decline in 2024, with mortgage rates for second homes locked in at a 7.3% annual decrease in April, according to Redfin’s analysis of Optimal Blue data.
“Last year, soaring prices reduced demand for vacation homes, both from cash and mortgage buyers, but the decline in demand among the latter was greater,” Phoenix Redfin Premier agent Heather Mahmood-Corley said in a statement. Because high interest rates exacerbate high prices.
“Interest in second homes has increased slightly this year, primarily from cash buyers who plan to eventually move full-time. People who need mortgages are still waiting on the sidelines, waiting for interest rates to drop — especially since interest rates on second homes are typically higher than on first homes. The interest rates for housing are even higher.
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