‘Demand remains strong’ 3 luxury real estate trends for second home agents that realtors need to know about
The challenges and unpredictability of the current macro environment cannot be denied. Suddenly, the idea of owning a second home, which saw a surge in demand at the height of the pandemic, sounds a lot less feasible in these changing times. As the market changes and inventory shrinks, the second home market is still valuable?
To answer this question, Pacaso compiled its July 2022 Second Home Market Analysis. Optimal Blue data analysis measures mortgage rate locks for second homes along with median purchase prices for the top 50 second home markets in the U.S. to determine transaction volume .
1. Demand for luxury second homes remains strong
Sales of luxury second homes and investment properties (homes intended for seasonal and/or recreational use that sell for $1 million or more) increased nearly 25% year-over-year in the second quarter of 2022. This also represents an increase of about 235% compared to the first quarter of 2020 just before the pandemic worsened in the U.S.
Property prices declined in May 2022 for the first time in five months, likely due to rising interest rates, uncertain economic conditions and geopolitical unrest. Stock market volatility has impacted the overall wealth of many consumers. Despite these changes, wealthy consumers are increasingly seeking more stable asset classes such as real estate. Research shows that real estate has been more stable than typical stock indexes during times of economic uncertainty since 1980. While consumers may be cutting their budgets, this group of buyers is less likely to leave the market and will continue to drive demand for luxury real estate.
2. Luxury second homes less affected by rising interest rates
Despite rising interest rates, demand in the real estate market remains strong, especially in the luxury second home segment. While the overall share of mortgage rate locks for all second homes fell below pre-pandemic levels, this was mainly due to the lower middle end of the housing market. In addition, more than 50% of second-home buyers pay cash 1 . For this reason, simply looking at fixed data on mortgage rates for second homes is not the best indicator of actual sales of second homes in the U.S. Luxury second homes generally account for about 12% of all fixed-rate, second home mortgages and average prices remained relatively stable year over year.
3. Second-home buyers flock to local destinations
Over the past two years, prices for top second homes such as Malibu, Aspen and Lake Tahoe have increased. This has led buyers to increasingly look for local second-home destinations, especially places where buyers can get more bang for their buck without jeopardizing their homes 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 about an impending recession, figures show that demand for luxury properties, particularly in the second home market, remained strong in the second quarter of 2022. For customers still waiting to enter the second-home market, trends show that real estate remains a stable place to buy, and even more so through responsible and accessible ownership models like shared ownership. This can be a great opportunity for your customers as well as for your company.
Pacaso It is the most modern and responsible way to buy and own a second home. We bring buyers together to purchase and jointly own a second home, and provide a fully managed service. Brokers earn a full 3% brokerage commission on each share of a home sold when they refer customers to one of our second homes.