Austin and the Bay Area saw the biggest declines in mortgages for second homes in 2023. Many of the people who did take out mortgages for second homes last year were high earners, white and/or Gen Xers.

Seattle, WA – May 13, 2024 (BUSINESS WIRE) (NASDAQ: RDFN) U.S. homebuyers took out 90,772 mortgages for second homes in 2023, down 40% from a year earlier and down 65% from the height of the pandemic housing boom in 2021, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Mortgages for primaryhomes fell at half that rate; they were down 20% year over year in 2023 and down 35% from 2021.

This is according to a Redfin analysis of Home Mortgage Disclosure Act (HMDA) data covering purchases of second homes, primary homes and investment properties from 2018 to 2023. The term “vacation home” is used interchangeably with “second home” in this report.

Home purchases fell across the board last year due to low inventory, high mortgage rates, and high home prices; 2023 was the least affordable year on record. Affordability hasn’t improved in 2024; monthly housing costs are at an all-time high. Mortgages for second homes dropped more than mortgages for primary homes for several reasons:

• It’s more expensive to buy a second home. The typical second home was worth $475,000 in 2023, versus $375,000 for primary homes. Additionally, the federal government increased loan fees for second homes in 2022, upping the total cost of buying one.
• Vacation homes aren’t a necessity the way primary homes are, so when housing costs skyrocket, many prospective second-home buyers back off.
• Purchasing a second home for your own use is a less attractive proposition than it was a few years ago because many companies are now requiring their employees to return to the office, meaning there’s less time to spend in vacation homes.
• Purchasing a second home to rent it out is also a less attractive proposition than it once was because the rental market has cooled from its pandemic peak, and owners of short-term rentals on sites like Airbnb are generally earning less revenue.

“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,” said Phoenix Redfin Premier agent Heather Mahmood-Corley. “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.”

Just 3% of all mortgages went to second-home buyers in 2023, down from 5% in 2020

The share of total mortgages that went to second-home buyers also dropped last year: 2.8% of all mortgage originations in 2023 were for second homes, down from 3.6% in 2022 and 5.1% in 2021.

The vast majority of mortgages go to buyers of primary homes: They took out nearly nine in 10 (88.6%) mortgages in 2023, 87.2% in 2022 and 89.2% in 2020. The remainder go to those buying investment properties, with 8.6% of all mortgages taken out in 2023 used for investment properties, compared with 9.2% in 2022 and 5.9% in 2020.

Vacation-home demand hasn’t picked up in 2024

An early look at this year’s data shows that demand for second homes hasn’t picked up in 2024. Mortgage-rate locks for second homes have been sitting near their eight-year low since the beginning of this year, according to a separate Redfin analysis of data from Optimal Blue. They declined 7.3% from a year earlier in April. By comparison, mortgage-rate locks for primary homes declined 1.6%.

Please note that Optimal Blue data is different from the HMDA data used in the rest of this report. Optimal Blue data is a leading indicator because it measures mortgage-rate locks (an agreement between a buyer and a lender that locks in a rate for a period of time; roughly 80% result in home purchases) as opposed to mortgage originations, and it includes a sample of U.S. mortgages rather than all U.S. mortgages.

The people who are buying vacation homes: Affluent, white, Gen X

High earners: The vast majority of people who took out mortgages for vacation homes in 2023 were—unsurprisingly—high earners. Nearly nine in 10 (86%) second-home mortgages issued last year went to high-income buyers. Just under 3% went to low-income buyers. (The nationwide median household income of home purchasers in the HMDA data is $178,000 for high-income buyers and $65,000 for low-income buyers.)

White people: Nearly four in five (79%) vacation-home mortgages went to white homebuyers in 2023. Asian and Hispanic homebuyers come next, with 6.4% and 6.2% of new vacation-home mortgages, respectively. Buyers who identify as more than one race took out 5.4% of second-home mortgages, and Black buyers took out 2.7%.

Gen Xers: 29.5% of vacation-home mortgages went to 55-64 year olds in 2023, and another 28.6% went to 45-54 year olds (Gen Xers were 43-58 in 2023). Next come 35-44 year olds (21%), 65-74 year olds (11.4%) and people under 35 (6.9%).

Second-home mortgages dropped most in Austin and the Bay Area

Mortgage originations for second homes fell in all major U.S. metros last year. They fell most in Austin, TX, with a 62.5% year-over-year drop in 2023. Austin’s housing market slowed substantially across the board last year as the pandemic migration boom waned and housing costs climbed too high for many locals. The next-biggest declines for second-home mortgages were mostly in expensive coastal cities: San Francisco (-57.6%), New York (-53.9%), Seattle (-53%) and Nashville, TN (-51.3%).

The smallest declines in second-home mortgages were in relatively affordable metros in the middle of the country and on the East Coast: St. Louis (-25.2% year over year), Kansas City, MO (-31.1%), Providence, RI (-31.1%), Montgomery County, PA (-32.1%) and Warren, MI (-32.1%).

Second homes are most common in Florida

Second-home mortgages made up the largest share of all mortgage originations in West Palm Beach, FL, a popular destination for snowbirds and vacationers, in 2023. Just under 7% of all mortgage originations in the West Palm Beach metro last year were for second homes. Next come Orlando, FL (4.1%), Riverside, CA (4%), New Brunswick, NJ (3.9%) and Tampa, FL (3.6%). Even though the share of second-home mortgages was largest in those places of all the major U.S. metros, they were still down at least 37% year over year.

To view the full report, including a chart, methodology and metro-level breakdown, please visit: https://www.redfin.com/news/vacation-home-mortgages-decline-2023/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country’s #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we’ve saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin’s press release distribution list, email press@redfin.com. To view Redfin’s press center, click here.

Contacts

Redfin Journalist Services:
Isabelle Novak, 414-861-5861
press@redfin.com

More new listings drive inventory higher 

• At $410,000, the median price in the Mid-Atlantic hit a record high in April. Prices rose across home types and reached new highs in four of the nine subregions in the Bright MLS service area.
• There were 25,772 new listings across the Bright MLS service area in April 2024. New listings increased from last month and were 14.7% higher than a year ago.
• All regions in the Bright MLS service area had higher new listings in April 2024, and the number of active listings at the end of the month was higher than a year ago in all regions. Still, overall inventory is half of its level in April 2019.
• Closed sales were 7.6% higher than April 2023, and new pending sales were above last year by 3.1%. However, year to date, both closed sales and new pending sales are lagging slightly behind 2023.
• While the market remains competitive, there are some buyers who are being sidelined by high mortgage rates, passing 7% again in mid-April, and record high prices. Affordability will be a key factor in the market throughout the rest of the spring and into the summer.

NORTH BETHESDA, Md., May 10, 2024 (PRNewswire) Buyers awaiting more selection have had their wish granted in 2024. New listings increased 14.7% in April 2024 and year-to-date have increased 4.4% compared to the number of new listings coming onto the market in the same period in 2023.

Higher new listings have boosted supply in the Mid-Atlantic relative to last year. All metro areas had more active listings at the end of April 2024 than were on the market in April 2023. After three consecutive months of growth, active listings were 17.2% above last year with some metros boasting even stronger improvements.

“More supply is good news for the housing market, but there is still a long way until we are back to a balanced housing market,” said Dr. Lisa Sturtevant, Bright MLS Chief Economist. “Affordability is a big challenge, and we see signs that summer buyers are holding back—like the fact that new listings are up, but showing activity is low.”

The median sale price was $410,000 in April, a new record high. Further, the median days on market indicates competition remains tight, with half of the homes sold in April off the market in eight days or less.

Yet buyers have continued to make purchases across the Mid-Atlantic. Closed sales in April 2024 were 7.6% above April 2023. Both closed sales and new pending sales only slightly lag 2023, down 0.9% and 0.4% year to date, respectively.

April Mid-Atlantic Housing Market by Region 

Philadelphia:
Price growth at two-year high in the Philadelphia metro area

• The median price of homes sold in April was $365,000, which is 10.9% higher than a year ago, the fastest year-over-year price appreciation since May 2022. Prices rose fastest in the New Jersey suburbs.
• Meanwhile, new listings are coming onto the market at a quicker rate than 2023 and boosting supply. All counties in the metro except Philadelphia County had more active listings at the end of April than a year ago. Supply remains tight despite the roughly 40% increase of what was on the market in April 2019.
• The additional inventory hasn’t slowed the market, with half the homes selling in nine days or less. This is a tad quicker than last year, when the median days on market was 11 days in April 2023.

Baltimore:
Baltimore metro buyers see increasing inventory, but homes still sell quickly

• Inventory at the end of April 2024 was 15.7% higher than April 2023, with nearly 4,000 homes on the market. This is the highest number of homes available at the end of April in the Baltimore metro area since 2020.
• Despite the additional selection, homes are moving off the market quickly. Nearly half of the homes sold in April 2024 were on the market for eight days or less, only one day slower than April 2023.
• Prices are also continuing to rise. The median sold price in the Baltimore metro area was $381,000, which was 5.8% higher than April 2023. The current median is just $4,000 shy of the high hit in both June and August 2023 of $385,000.

Washington, D.C.:
More inventory has led to more transactions in the Washington D.C. metro

• For three consecutive months, active listings have trended higher than last year. At the end of April, there were 6,569 active listings, which is 21.8% higher than April 2023.
• Buyers continue to purchase, and closed sales surpassed what they were last April (+7.4%). Pending sales also improved, up 4.0%. This is the first year-over-year increase in new pending sales since February 2022.
• The median price in the metro was $640,000 in April 2024, hitting a new record. Median sales prices for detached homes and townhomes were both at record highs, while condo prices were slightly below the February 2024 high.

The full Mid-Atlantic and market metro area reports are available at BrightMLS.com/MarketInsights.

About Bright MLS
Bright MLS was founded in 2016 as a collaboration between 43 visionary associations and two of the nation’s most prominent MLSs to transform what an MLS is and what it does, so real estate pros and the people they serve can thrive today and into our data-driven future through an open, clear, and competitive housing market for all. Bright is proud to be the source of truth for comprehensive real estate data in the Mid-Atlantic, with market intelligence currently covering six states (Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia) and the District of Columbia. Bright MLS’s innovative tool library—both created and curated—provides services and award-winning support to well over 100K real estate professionals, enabling their delivery on the promise of home to over half a million homebuyers and sellers monthly. Learn more at BrightMLS.com.

SOURCE Bright MLS