December demand for vacation homes topped pre-pandemic levels by 77%, a little down from November’s 80% but still elevated, Redfin reported.
“The wealthy are still flush with cash and have access to cheap debt, which is why second-home purchases remain far above pre-pandemic levels,” said Redfin Chief Economist Daryl Fairweather.
“While interest in second homes is stabilizing after the big boom in the second half of 2020 and the beginning of 2021, I expect demand to remain high well into this year. Remote work isn’t going anywhere and mortgage rates are still quite low.”
Redfin’s index defines “pre-pandemic” as January and February 2020, set to 100, and looks at mortgage-rate lock. Rate lock on second homes increased steadily between 2015 and 2020 before a major dip in April of 2020 when the pandemic took the nation by storm.
The trend since that drop has been explosive, however, with the index hovering close to 200. January 2021 holds the record for highest demand, at 92%. The lowest point of last year, August, still boasted 50% annual gains.
The surge is the result of affluent Americans taking advantage of remote work and historically low-interest rates.
Interest remains high, as Redfin notes the downturn to 77% is likely a holiday season slowdown and not an indicator of decreasing demand.
The housing boom of 2021 was driven by stock shortages, leading to bidding wars on properties and skyrocketing price appreciation.
While competition has shown signs of cooling, demand still outpaces inventory and multiple offers keep prices elevated, including in the second home and luxury market. Forty properties sold for more than $50 million in the US in 2021. Vacation hotspots like Palm Beach, Aspen, and the Hamptons made the list of most expensive home sales last year.
In Hawaii, home sales over $10 million are six times higher than in 2020.
“It’s like nothing anyone has ever seen before,” Matthew Beall, CEO of Hawaii Life, told the Wall Street Journal. “It’s almost like a hot nightclub. It’s not can you get a deal, it’s can you get behind the rope and to the door.”