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Mortgage originations for vacation homes in the United States fell to a six-year low in 2024, with high prices, elevated mortgage rates, and shifting work patterns cooling the market significantly. According to an analysis of Home Mortgage Disclosure Act (HMDA) data, only 86,604 second-home mortgages were originated in 2024, representing just 2.6% of all mortgages and a 5% year-over-year decline. This trend indicates that while the entire housing market slowed, demand for non-essential second properties fell more sharply than for primary residences.
The slowdown follows a dramatic buying boom during the peak pandemic years of 2020 and 2021. Several key factors have made second-home ownership less appealing for many Americans. The median value of a second home was $495,000 in 2024, significantly higher than the $385,000 median for a primary home. Furthermore, loan fees for second homes increased in 2022, adding to the overall cost. With inflation pushing up the price of essentials, many households are prioritizing necessary expenses over discretionary purchases like vacation properties. The cooling rental market, particularly for short-term rentals like Airbnb, has also reduced the investment appeal of a second home, as the potential for rental income has diminished from its peak.
Florida, a traditional hotspot for vacation properties, saw the most significant declines in second-home mortgage originations among major metropolitan areas. Miami led the nation with a 32.2% year-over-year drop, followed by Orlando (-28.4%), Fort Lauderdale (-28%), West Palm Beach (-23.7%), and Tampa (-20.9%). The state's appeal has been dampened by soaring housing costs, driven in part by rising insurance premiums, Homeowners Association (HOA) fees, and property taxes. An HOA is an organization in a subdivision or condominium that makes and enforces rules for the properties. Additionally, concerns over the increasing frequency and intensity of natural disasters are causing some potential buyers to hesitate, fearing potential declines in property values.
The profile of the typical vacation home buyer in 2024 is notably narrow. The data reveals that these purchases are increasingly concentrated among affluent, middle-aged, white buyers. Nearly 90% (86.4%) of second-home mortgages were issued to high-income buyers, defined as those with a median household income of $280,000. By generation, Gen Xers (ages 45-64) accounted for nearly 60% of all second-home mortgages. Baby Boomers were the only demographic group to increase their purchases year-over-year. Regarding race, white homebuyers received 79.7% of second-home mortgages, far outpacing Asian (6.4%), Hispanic (6%), and Black (2.6%) buyers.
For prospective buyers, the current market suggests that a vacation home is now primarily a luxury for high-income households rather than a feasible investment for the average American. While the rate of decline has slowed from the dramatic drops seen in 2022 and 2023, a quick rebound is unlikely without a significant improvement in affordability. Key considerations now include not just the purchase price but also escalating carrying costs like insurance and HOA fees, especially in climate-vulnerable areas like Florida. Buyers should carefully assess the long-term value and rental potential before committing in today's cooled market.
