Redfin: Demand for second homes up 100%

Demand for second homes has skyrocketed, defying the coronavirus economic crisis and increasing 100% from October 2019 to October 2020, according to a Redfin analysis of mortgage-rate lock data from Optimal Blue.

The increased appetite for vacation homes outpaced that of primary homes, which rose 50%. This is the fourth triple-digit increase in the last five months “even as millions of Americans grapple with financial devastation triggered by the coronavirus pandemic,” the report notes.

“Demand for second homes is particularly strong as affluent Americans work remotely, no longer need to send their kids to school in person and face travel restrictions,” explained Taylor Marr, Redfin’s lead economist.

Mortgage-rate lock agreements between a homebuyer and a lender—roughly 80% of which result in a purchase—offer valuable insight into buyer preferences, as they require homebuyers to specify whether they will apply for a primary home mortgage, a second home or an investment property.

“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. Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic,” said Marr.

At least some of the second homes purchased this year however likely will turn into primary homes “in cases when buyers close a deal on a second home before listing their current house for sale,” he added.

During the pandemic, vacation destinations have become more popular among homebuyers who are relocating. Another Redfin report found that eight of the 10 U.S. counties more in demand over the past year include popular vacation spots such as Lake Tahoe, Cape Cod and Palm Springs.

Other examples, according to Melissa Killham, a Redfin real estate agent in Wisconsin, include demand surge in Lake Geneva, a resort town about an hour southwest of Milwaukee. 

“The home-tour rate in Lake Geneva has doubled. People from the city can’t travel for vacation so they’re looking for second homes,” she said. “The Lake Geneva school district is also still offering in-person learning, so a lot of families are buying second homes in the area so they can work remotely and send their kids to school.”

Home values have are climbing across the country, especially in seasonal towns – which Redfin defines as such if more than 30% of housing stock serves seasonal, recreational or occasional purposes.

Analysts found in October the median sale price in seasonal towns increased 21% year over year to $420,000, outpacing the 14% growth in non-seasonal towns.

“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,” Marr said. “With workers still commuting in one or two days a week, resort towns that are near major cities will likely continue to heat up.”

Paper City, now community bank with Finastra’s tech

Paper City Savings Association of Grand Rapids, Mich., is now live on Finastra’s Fusion Phoenix core, and Fusion Digital Banking, to provide a single platform for consumersbusinesses and employees. The core uses application programming interface (API) architecture technology to easily integrate and scale mortgage lending technology and operations.

Finastra’s software enables Paper City, which was established in 1923 as a financial institution owned by depositors to provide mortgage loans for single-family homes in the South Wood County area, to transform into a full-service community bank.

Furthermore, the new technology makes it easy for Paper City to achieve its long-term goal of expanding into commercial banking.

“We will be able to process loans more quickly and expand to a full suite of commercial products that includes deposit, lending and internet banking,” said Tina Bartram, operations officer at Paper City Savings. “With the addition of the Fusion Phoenix core and Fusion Digital Banking, which fully integrate with our existing payments and lending solutions from Finastra, we expect to see improved efficiencies that enable us to better serve our existing customers.”

The upgraded core and digital banking platforms will improve self-service channels and streamline the firm’s lending and mortgage capabilities through Fusion LaserPro and Fusion Mortgagebot to process loans much faster.

The company said it expects better lending efficiencies combined with new bill payment products and real-time payments via account-to-account and person-to-person transfers will improve overall retail and commercial services.

To establish true differentiators in the market, “community banks must be able to anticipate customer needs and service them in a way that matches current expectations,” said Chris Zingo, SVP and GM of Americas field operations, Finastra. With Fusion Phoenix core, Paper City “will have a total view of the customer based on data from across silos,” including deposits and loan servicing, within a single database.

C.A.R. applauds FHFA for raising Fannie & Freddie loan limits

The California Association of Realtors (C.A.R.) praised the Federal Housing Finance Agency’s (FHFA) announcement to increase the 2021 conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac. This should make a big difference across California, which is home to some of the highest price increases in the nation. 

The previous loan limit on one-unit properties increased to $548,250, up from $510,400, and the cap in high-cost areas increased to $822,375, up from $765,600.

“C.A.R. commends the FHFA for recognizing California’s record-setting home price increases during this past year and raising maximum conforming loan limits, which will give tens of thousands of California homebuyers a chance at homeownership,” said C.A.R. president Dave Walsh, vice president and manager of the Compass San Jose office. “Increasing the existing Fannie Mae and Freddie Mac conforming loan limits will greatly benefit higher-priced areas of the state and provide stability and certainty to the housing market.”

One of the nation’s largest state trade organizations with more than 200,000 members, C.A.R. and the National Association of Realtors (NAR) reportedly have been advocating for quite some time in favor of permanent increases to conforming loan limits.

Findings from the third-quarter 2020 C.A.R. Housing Affordability report showed affordability declined in all major regions of the state compared to both the previous quarter and 2019.

For example, to qualify for the purchase of a $693,680 statewide median-priced, existing single-family home in Q3 2020, the buyer must have a minimum annual income of $127,200. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,180, assuming a 20% down payment and an effective composite interest rate of 3.15% – which decreased from 3.43% in Q2 2020 and 3.85% in Q3 2019. 

The statewide median home price in Q3 2020 increased 13.6% from the previous quarter and jumped 13.8% from Q3 2019.

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