The buzz about second home purchases is starting to subside, in large part because of rising prices and tighter mortgage rules, according to Redfin.
Although the number of buyers who locked in mortgage rates to buy a second home in May rose almost 50% from a year ago, “this is the first time in a year that the annual growth falls below 80%, ”according to Real. real estate brokerage.
In June 2020, demand for second homes jumped, with second mortgage locks increasing 110% from the previous year, according to Redfin. The level remained high until April.
In May, however, the annual increase cooled to pre-pandemic levels. Although Redfin noted that the year-over-year increases are likely “overstated” due to the pandemic hampering real estate activity a year ago.
The slowdown this spring can be attributed to several factors, according to the report. For example, “high prices probably play a role, as does the reopening of offices,” Redfin said.
In addition to the fact that there is already a “typical spring downturn”, many homebuyers who wanted another residence have already caught one during the pandemic.
In addition, mortgage lending rules over the past two months have tightened. Now, under the new rules, mortgages on second homes and investment properties can only account for 7% of a lender’s total pipeline, which is the total number of loans in process, underwriting, or underwriting. fencing.
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However, house prices have also “climbed rapidly in recent months” and have now “become prohibitive for some people looking for second homes,” said Daryl Fairweather, chief economist at Redfin.
And because they’re not a necessity, “vacation home buyers shrink from potentially overpriced properties more quickly,” Fairweather said.
Although the people looking for their main house have not come out of the woods.
Even they “may have to shell out more money than they want because they need a roof over their heads,” Fairweather added.