BAM Key Details:

  • A new Redfin report shows demand for vacation homes is down more than 50% from pre-pandemic levels.
  • Mortgage rates, new loan fees, and a cooling rental market are deterring second-home buyers. 

A new Redfin report shows demand for vacation homes, based on mortgage-rate locks, is down 52% in March compared to pre-pandemic levels, on a seasonally adjusted basis. 

That’s compared to a 13% drop in demand for primary homes. 


Source: Redfin

Rate locks for second homes dropped to their lowest level since 2016 in February 2023 and stayed nearly as low in March. They peaked at 89% above pre-pandemic levels in August 2020 after a meteoric rise during the pandemic home-buying frenzy. 

During that time, many affluent Americans, persuaded by low mortgage rates, remote work, and pandemic travel restrictions, bought second homes in vacation destinations. 

Fast forward to the present, and high mortgage rates, a shrinkage in remote work options, a dampened rental market, and added second-home costs have had the opposite effect. 

High rates, new loan fees, and a slowing rental market deter second-home buyers

Demand for both primary and second homes has declined considerably since early 2022, thanks to the following:

  • Skyrocketing (and still high) mortgage rates
  • Persistently high home prices
  • Stubborn inflation 
  • Limited inventory—especially at price points close to the median

That said, while demand for primary homes is down 13% from pre-pandemic levels, demand for vacation homes has taken a bigger hit, largely due to the following reasons: 

  • Vacation homes often cost more than primary homes.
  • Vacation home buyers are quicker to retreat from the market because second homes are not a must-have.
  • Many remote workers are now returning to the office.
  • The short-term rental market is over-saturated (thanks to the pandemic buying rush), making investments in rental property a less attractive option.
  • The long-term rental market is also slowing.
  • Many local governments are imposing new taxes and tighter restrictions on short-term rentals.
  • Stock market declines are shrinking bank accounts, leaving less money for would-be buyers to put toward down payments and monthly housing costs. 
  • Many buyers with the means and inclination to buy a second home have already bought one during the pandemic buying frenzy. 

With housing payments near their all-time high; a lot of people can’t afford to buy one home right now, let alone a second. Add the recent increase in loan fees, inflation, shaky financial markets, the end of pandemic-related financial stimulus and many companies calling workers back to the office, and it’s simply a challenging time for most Americans to buy a vacation home.

Taylor Marr

Redfin Deputy Chief Economist

Top takeaways for real estate agents

Given the reasons why so many would-be vacation home buyers have backed off, those who remain may be hoping that the drop in demand for vacation homes will lower home prices. 

In some markets, it might. Keep your buyers informed of any changes in the market or in lending practices that could impact their purchasing power. 

For those hoping to rent out their vacation home for part of the year, collect the relevant data they need to form a clear picture of what they’re likely to earn in rental income, compared to the costs involved. 

No client of yours should enter a transaction unprepared.