‘Demand remains strong’: 3 luxury second home real estate trends agents need to know
Published Date: January 5, 2023
There’s no denying the challenges and unpredictability of today’s macro environment. Suddenly, the idea of owning a second home — which saw a surge in demand during the height of the pandemic — sounds a lot less feasible during these changing times. As the market shifts and inventory tightens, is there still value in the second home market?To help answer that question, Pacaso compiled its Second Home Market Analysis in July 2022. The analysis of Optimal Blue data measures second home mortgage rate locks along with median purchase prices for the top 50 second home markets across the U.S. to determine transaction volume. Here are the biggest takeaways from the report.
1. Demand remains strong for the luxury second home market
Sales of luxury second homes and investment properties — homes designated for seasonal and/or recreational use that are sold for $1 million or more — increased nearly 25% year-over-year during the second quarter of 2022. This is also an approximate 235% increase compared to the first quarter of 2020 just before the pandemic intensified in the U.S. Home prices decelerated in May 2022 for the first time in five months, likely driven by rising interest rates, uncertain economic conditions and geopolitical unrest. The volatility of the stock market has impacted the overall net worth of many consumers. Despite these changes, affluent consumers are increasingly looking at more stable asset classes like real estate. Research shows that since 1980, real estate has remained more stable than typical stock market indexes during times of economic uncertainty. While consumers may be cutting down on budgets, this group of buyers is less likely to drop out of the market and will continue to drive demand for luxury real estate.
2. Luxury second homes are less impacted by rising interest rates
While interest rates are rising, demand for the housing market continues to be healthy, particularly in the luxury second home segment. While the total share of mortgage rate locks for all second homes fell below pre-pandemic levels, this was in large part due to the median-to-lower end of the housing market. In addition, more than 50% of second home buyers pay in all cash. For this reason, looking simply at second home mortgage rate lock data is not the best indicator of true U.S. second home sales. Luxury second homes overall make up about 12% of all second home mortgage rate locks, and median prices remained relatively flat on a year-over-year basis.
3. Second home buyers are flocking to local destinations
For the past two years, premier second home destinations like Malibu, Aspen and Lake Tahoe have seen accelerated prices. This has led buyers to increasingly look at more local destinations for their second home — in particular, destinations where buyers can get more for their money without compromising on their home or nearby attractions. Beachfront counties and areas with year-round outdoor activities saw impressive growth, including Coeur d’Alene, ID, Williamson County, TN, Cape Cod, MA and Sevier County, TN to name a few.
The stability (and opportunities) of the second home market
Despite our current reality of rising interest rates and concerns of an impending recession, the numbers show that demand for luxury real estate — the second home market in particular — remained strong during the second quarter of 2022. For clients still hoping to enter the second home market, trends show that real estate remains a stable place to purchase, and even more so through responsible and accessible ownership models, like co-ownership. This can be a huge opportunity for both your clients and your business.For the full analysis and methodology, click here. Interested in working with Pacaso to expand your services and help more clients buy their second home? Check out our agent resources to get started.