The pandemic's forced lockdowns caused homeowners to rethink their living space. For some, this meant home improvement projects. For others, it meant buying another home entirely.
In fact, there were so many who chose that second option that according to a report by luxury home co-ownership platform Pacaso, second-home mortgage rate locks more than doubled during the pandemic compared to a year earlier.
Pacaso's Second Home Market report compiled property use and mortgage rate lock data, which is a top indicator of second-home purchasing activity. The second-home market peaked during fall 2020, at 103.7% year-over-year growth, but it fell 26.6% year over year by this summer.
While the pandemic-fueled surge has subsided, the overall market share of second homes is still above where it was prior to March 2020. From 2017 through 2019, second-home transactions took 3.8% of a quarterly rate lock market share, on average. As of this summer, second homes had a 4.3% market share.
Top destinations for second homes
For the report, Pacaso zeroed in on 50 of the nation's top second-home destinations, based on census data from counties where the percentage of seasonal homes and median home values were at or above the 20th percentile. The mortgage rate lock data were analyzed to determine real estate market activity, as about 80% of mortgage rate locks culminate in home purchases.
From the looks of the list, the pandemic was a time when people made good on their dream of owning a vacation home in the mountains or at the beach. Top destinations for second homes include metro hot spots like Cape Cod, Massachusetts; Sanibel Island, Florida; Polson, Montana; Sandpoint, Idaho; and Crested Butte, Colorado.
“It’s clear that there’s been a sea change not only in where people live and work, but also where they choose to get away from it all. The market looks completely different than it did two or three years ago,” said Austin Allison, Pacaso's CEO. Whereas metro areas had previously been hot spots, Allison says there is "intense interest" in other areas, including Boise, Idaho, and Eagle County in the Colorado Rockies.
Out of the 50 destinations included, 46 saw a year-over-year decline in second-home transactions during the summer of 2021. In the four destinations that were the exceptions, the market is still soaring based on mortgage rate lock data:
- Kauai, Hawaii; up by 23.5%
- Summit County and Eagle County, Colorado; up 10.2% and 9.8%, respectively
- Boise County, Idaho; up by 4.4%
Transactions are down, but prices are up
While the number of transactions are on the decline, prices for second homes are high and climbing. In fact, the Pacaso report noted that all but one county saw double-digit purchase price growth for second homes this summer. Meanwhile, Kauai, Hawaii saw the highest growth. The median purchase price there was $1.25 million, up a whopping 83.3% from last year's prices.
Other places that saw price hikes included Wasatch County, Utah (up 53.9%) and Gunnison County, Colorado (up 53.2%). These increases could be attributed to lower median prices than those found in the nearby highly desirable towns of Park City, Utah, and Breckenridge, Colorado, respectively.
Says Allison, "This widespread demand is creating a new wave of second-home markets with more moderate median home prices but the same types of amenities and outdoor recreation options typical of their more famous counterparts."
The bottom line
Without a doubt, the pandemic caused many people to think twice about the way they live, which in turn led to second-home purchases for those who could swing it. While the market has since slowed down in most second-home markets, it is still better than it was before the pandemic.