Vacation homes are back to being a nice-to-have for the wealthy, it seems. 

After a pandemic-era boom, demand for second homes has fallen below the pre-pandemic baseline for the first time in two years and mortgage-rate locks for second homes are down 4% from before the pandemic in May, according to a new report from Redfin. That’s down from a revised rate of 3% above pre-pandemic levels a month earlier, and 70% above pre-pandemic levels a year earlier.

Demand for second homes is falling due to the current environment of high home prices, mortgage rates hovering around 6% and stock market woes, Redfin said, but also because of the federal government’s increase in loan fees for second homes in April. Those increases adding roughly $13,500 to the cost of purchasing a $400,000 home, the data showed. 

“The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping,” said Redfin Deputy Chief Economist Taylor Marr. 

The drop in vacation-home demand marks “a drastic change” from the second half of 2020 and 2021, when mortgage-rate locks for second homes skyrocketed due to  record-low mortgage rates and the flexibility to work from anywhere thanks to remote work, according to Redfin. Demand peaked in March 2021, when it was about 90% above pre-pandemic levels. 

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