Second Home Rate Locks Hit All-Time High In 2021

The percentage of second home mortgage rate locks reached its highest recorded level in Q1 2021, dipping slightly in Q2 and Q3 before jumping back up at year-end, according to Pacaso’s Second Home Market report.

Second home locks made up 5.7% of all mortgage rate locks in Q1 2021, a record high. They dropped slightly in Q2 and Q3, to 4.6% and 4.5%, respectively, but jumped back up to 5% in Q4 2021.

“In April of last year, people stopped to take a beat, to see how things would shake out in what everyone hoped would be a post-pandemic reality,” said Pacaso CEO Austin Allison.

“For some, that also meant going back to the office, and perhaps not coincidentally, second home sales started to slow. But these last few months, many employers finally decided to make remote work more permanent. This seems to have spurred renewed interest in second homeownership.”

Demand for vacation homes has surged as affluent Americans take advantage of remote work and historically low-interest rates.

“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.” 

Second homes gained popularity in “Off-Broadway” markets like Central and North Florida. Sumter County, Florida, saw a 65% year-over-year rise, the largest increase in second home rate lock transactions. The Southeastern US had the largest share of YOY increases in Q4.

“Sumter is a perfect example of the kinds of locations we call ‘vacation-destination-adjacent’ that have been catching our eye. If established second home destinations are like Broadway, these emerging nearby destinations are like Off-Broadway, and their moment in the limelight – or the sunshine – is coming,” Allison said.

Pacaso’s report found that 43 of the 50 counties they track saw double-digit home price appreciation. Price growth was particularly high in Eastern California. 

Mono County, California, near Yosemite National Park, saw the highest appreciation. The median sale price of second homes was %790,000, up 83.7% YOY. Pacaso noted that limited construction may have contributed to the area’s price growth, in contrast to Florida, which has seen more development.