Demand for second homes is on the rise, even as some Americans face financial hardships due to the pandemic. For many affluent American’s, the prospect of a second home is now more tempting than ever due to low interest rates, high amounts of time spent at home, and the increased relocation flexibility due to remote work possibilities. This phenomenon is an interesting example of a k-shaped recovery the US economy has been experiencing.
According to a report from Redfin, demand for second homes skyrocketed in October 100% from last year, marking the fourth triple-digit increase in the past five months.
The second-home demand outpaced the 50% increase in demand for primary homes, signaling particular interest in a second home investment.
WHY ARE WE SEEING AN INCREASE IN DEMAND FOR SECOND HOMES AMIDST A PANDEMIC?
The answer is threefold.
THE LIFESTYLE ASPECT second home vacation home
People are spending more time at home than ever before, and as a result, they want to love where they live! With decreased opportunities to travel and increased remote work opportunities, second homes and vacation homes are extremely compelling.
The inability to travel coupled with mandates to stay home incites us to create our own residential paradises. Purchasing a second home allows for a safe, consistent vacation alternative that can provide a much-needed change of scenery.
AN ADVANTAGEOUS REAL ESTATE MARKET
Second homes don’t only provide lifestyle benefits, they can also be really great financial investments. A lot of second home buyers are just regular folks, looking to think outside of the box. They want to purchase an asset that essentially pays for itself every year. Second homes can go up in value and eventually net a return, all while the owners get to use them as personal paradises. Some second homes can even be used as vacation rentals to produce their own revenue streams.
The current real estate market is making this all the more possible for many. Interest rates on home loans are at historic lows, being readily available below 3%. In fact, interest rates have hit a historic low more than 8 times in 2020.
This is a tempting factor driving home sales from both existing and prospective homeowners. “With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans,” says lead economist Taylor Marr.
THE K-SHAPED RECOVERY
The pandemic is not affecting all industries or individuals equally. According to Bloomberg, “While nearly 11 million people were unemployed as of November, many other Americans had grown wealthier thanks to surging stock and house prices, spurring the term the “K-shaped recovery.”
While some continue to struggle, others are riding a wave of recovery. The diverging strokes of the letter k represent the different fortunes.
Real estate has been a large facilitating factor in the upper stroke as affluent buyers and sellers take advantage of low rates and healthy margins to relocate to more spacious accommodations, or even purchase a second home.
WILL SECOND HOME DEMAND CONTINUE TO INCREASE?
The increase in second home purchases is a trend that is likely to continue, even as physical offices reopen. Consumer preferences are changing in major ways when it comes to housing, employment, and social activity. Those changes won’t simply dissipate when the pandemic is over.
Marr explains, “Even when offices reopen, folks will be able to spend more time than ever before in their second homes because many employers will continue to offer flexible remote-work policies.”
If you are considering investing in a second home, now may be the perfect time to get started. Reach out today to talk through your options with a real estate expert.