A recent Redfin report that analyzed the Home Mortgage Disclosure Act data on second-home purchases showed a 7.3 percent drop from April 2023 and a 1.6 percent decline in primary home mortgages.

This follows last year’s trend of falling mortgages for both secondary and primary homes. The report indicates US homebuyers took out 90,772 mortgages for second homes in 2023, down 40 percent from a year earlier and down 65 percent from the height of the pandemic-housing boom in 2021. Mortgages for primary homes also experienced a decrease of 20 percent in 2023.

Continued low inventory and high mortgage rates and home prices are being blamed for the slowdown, as the report shows 2023 was the least affordable year on record. “Affordability has not improved in 2024,” the report states. “Monthly housing costs are at an all-time high.”

As a result, many prospective second-home buyers are playing the waiting game, while others now consider a vacation home as a less attractive option. The vacation rental market has also cooled from previous years, with owners of short-term rentals earning less revenues.

The Austin, Texas, metropolitan area had the biggest loss in second-home mortgage applications, with a 62.5 percent drop, followed closely by metropolitan San Francisco at 57.6 percent, New York City at 53.9 percent (including the popular Hamptons destinations on Long Island). , and Seattle at 53 percent.

According to the Mortgage Bankers Association, a national organization based in Washington, DC, rates have climbed over the past week, while mortgage applications have declined. “Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent—its highest level since early May,” said Mike Fratantoni, MBA senior vice president and chief economist. “After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down, with purchase activity specifically 13 percent below last year’s level.”

Related Stories

Your Vacation Home Could Provide Tax-Free Income
Forget the Second Home at the Lake, US Vacation Home Buyers Are Going to Mexico

The Boston metropolitan area saw a 43.9 percent drop in mortgage applications, and Cape Cod—a nearby popular vacation destination for many Bostonians—is experiencing a similar situation. Amy Marseglia, broker associate with William Raveis Real Estate in Eastham, Cape Cod, said while there are a high number of potential buyers, the lack of inventory is holding them back. “Housing inventory has been suppressed here for a few years now, and the people who still want homes are backing up,” she told The Epoch Times.

Another reason why mortgage applications are down is that fact that many buyers are still offering cash. “It’s a desirable location, and there are a lot of people coming in with cash offers to buy something here,” said Ms. Marseglia. Some are purchasing second homes for themselves or for vacation-rental income.

Typically, homes in good condition are being scooped up almost as soon as they come onto the market, and bidding wars are still common. “It depends on the price point as to how much over the asking price a potential buyer will offer,” explained Ms. Marseglia. “Homes priced over $1 million will tend to get much higher over-asking amounts.”

Last year, just 3 percent of all mortgages nationwide went to second-home buyers, representing a 5 percent drop from 2020. Generation X (aged 43–58) purchased almost 30 percent of vacation homes in 2023. Millennials (35–43) make up 21 percent of the vacation home-buying market, and baby boomers (65–74) at 11.4 percent. Generation Z, including those under the age of 35, comprised only 6.9 percent of these buyers.

The Redfin report also states that 86 percent of people who took out mortgages for vacation homes in 2023 were high earners with a national median household income of $178,000. Caucasian homebuyers were responsible for 79 percent of vacation-home mortgages, while Asian and Hispanic homebuyers comprised just 6.4 percent and 6.2 percent, respectively. African American buyers took just 2.7 percent of those mortgages.

“Most of the buyers I’m working with now fall in that Gen X range, but I do see a lot of early ‘boomers’ as well,” added Ms. Marseglia. On the selling side, she indicated some people are either upsizing or downsizing on the Cape or moving away from the area.

Second-home mortgages remained very popular throughout Florida, with West Palm Beach showing the largest share of all mortgage originations with almost 7 percent. Orlando and Tampa were the next two top spots in the Sunshine State with 4.1 percent and 3.6 percent, respectively.

David Serle, president of Broward, Palm Beaches & St. Lucie Realtors told The Epoch Times that the second home market has cooled down a bit on Florida’s east coast, just north of Miami. “A lot of people are still paying cash and if they are taking a mortgage, they’re making significantly higher down payments to keep the monthly mortgage payments lower,” he said.

Mr. Serle indicated the single-family market is good, while condo sales are slower. “I think that may be due to increasing condo fees and assessments that could be preventing people from making purchases” he said.

Most of his clients are looking for vacation properties to use for themselves, while some do intend to rent them out at least some of the time. With the median price of a single-family home at about $650,000, the area is very attractive to people who are looking to get more for their money than in Miami. “We’re seeing a big influx from California, and the international market seems to be coming back,” he added.

Inventory remains lower than normal—with about 4.4 months’ supply—adding to the current sellers’ market. Mr. Serle’s clientele is a mixture of millennials as well as baby boomers, and since Florida usually doesn’t experience seasonal climate, potential buyers are looking for properties all year round.

The smallest declines in second-home mortgages were in relatively affordable metropolitan areas in the middle of the country and on the East Coast: the Missouri cities of St. Louis (-25.2 percent year over year) and Kansas City (-31.1 percent); Providence, Rhode Island (-31.1 percent); Montgomery County, Pennsylvania (-32.1 percent); and Warren, Michigan (-32.1 percent).