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The number of homebuyers seeking mortgages for second homes has taken a nosedive this year, even as the inventories of single-family homes and condominiums for sale on Cape Cod hit never-before-seen lows last month.
A Redfin analysis of mortgage rate locks from real estate data firm Optimal Blue shows demand for second-home loans is now just below where it was in February 2020, right before the COVID-19 pandemic hit the United States. Demand is also down over 90 percent from its pandemic high in March 2021.
“Skyrocketing monthly payments, along with higher loan fees, have priced many second-home buyers out of the market,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “Many would-be second-home buyers are also deterred by turmoil in the stock markets, high inflation and recession fears, and they can be quicker to pull back from the market because vacation homes aren’t a necessity the way primary homes are. The cooldown in the second-home market is likely to continue as long as mortgage rates are elevated and the stock market is slumping.”
But data released this week by the Cape Cod & Islands Association of Realtors suggests the trend may not be solely an affordability problem, at least in Massachusetts’ premier vacation-land.
Since mortgage interest rates began spiking this spring, the share of cash buyers on Cape Cod rose from 34.23 percent in March to 41.13 percent in May. That compares to 33.42 percent in March 2021 and 39.64 percent in May 2021.
During the pandemic, some wealthy second-home buyers chose to seek out mortgages instead of making cash purchases thanks to near-zero mortgage interest rates.
As those interest rates have risen, other markets in Massachusetts saw increases in price cuts on residential listings showing, experts said, declining demand driven by plummeting affordability. While the number of price-cuts on Cape Cod residential listings is roughly in line with recent years CCIAOR data shows, at 130 in May 2022 compared to 136 in May 2021, it’s forming a much higher share of listings on the market.
Single-family inventory sank to 428 in May, compared to 491 in May 2021 and a whopping 1,512 in May 2020. Condominium inventory went even lower, to 85 units on the market last month compared to 153 in May 2021 and 451 in May 2020.
