Mortgage-rate locks, which allow homebuyers to secure an interest rate for a set period, are generally a reliable indicator of purchase demand, with around 80% of rate locks leading to home purchases.
“Most of the homes that are sitting on the market right now are second homes – especially those in the $400,000 to $800,000 price range, which tend to be more stagnant,” Shay Stein, a Redfin Premier real estate agent based in Las Vegas, said in the report.
Factors behind the decline
While demand for mortgages is down across the board due to high home prices and elevated interest rates, second-home buyers are feeling the impact more acutely for several reasons.
One key factor is that second-home buyers, who are often in a position to pay cash, are less inclined to take out mortgages when rates are high. While mortgage rates have dipped in recent months, they remain more than double the pandemic-era lows. For many affluent buyers, it makes more financial sense to pay cash for a second home rather than take out a mortgage with high interest payments.
Additionally, second homes are typically seen as a luxury rather than a necessity. This means when housing costs rise, many prospective buyers decide to wait. The typical home in seasonal towns, where second homes are common, sold for $589,162 in August – up 4.1% from a year earlier. By contrast, homes in non-seasonal towns sold for an average of $437,787, up 4.7%.