As mortgage rates rise, demand for second homes reached its highest level in a year during the month of January, and demand for primary residences was also up 42% from pre-pandemic levels, Redfin reports. Second home demand was up 87% from pre-pandemic rates last month as affluent Americans opted to lock in their mortgage rates before more potential gains take hold in the coming months.
January mortgage rates rose above 3.5% for the first time since March 2020 at the start of the pandemic, motivating buyers to make home purchases before rates surge even higher. As home prices in seasonal towns outpace real estate in other regions, demand for second homes will likely remain strong in 2022.
Home prices in seasonal towns—where second homes are often located—are up more than prices in non-seasonal towns. The typical home in a seasonal town sold for $501,000 in December—the most recent month for which data is available—a 20% year-over-year increase. That marks 18 straight months of double-digit price growth.
In non-seasonal towns, the median sale price rose 13% year over year to $408,000. For this analysis, a seasonal town is defined as an area where more than 30% of housing is used for seasonal or recreational purposes according to the 2019 Census.
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