Demand for Second Homes Declines in 2022 and is Below Pre-Pandemic Level
Demand for second homes surged after the onset of the COVID-19 pandemic nearly doubling the pre-pandemic demand level in late 2020.
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Archana Pradhan holds the position of principal, economist as part of the Office of the Chief Economist at CoreLogic. With years of experience in housing economics, applied econometrics and spatial analysis, she is responsible for analyzing housing and mortgage markets.
Prior to joining CoreLogic, she was program manager and senior research analyst at the National Community Reinvestment Coalition. She earned her doctorate in natural resource economics from West Virginia University.
Demand for second homes surged after the onset of the COVID-19 pandemic nearly doubling the pre-pandemic demand level in late 2020.
Rising interest rates and higher home prices erode home buyer affordability as fewer buyers can afford higher home mortgage costs. As a result, the diminishing demand from borrowers may lead to expansion of mortgage credit availability and mortgage risk as more borrowers are considered who may have not otherwise qualified for a mortgage when demand was higher.
Non qualified mortgage loans have helped creditworthy borrowers who cannot otherwise qualify for traditional mortgage loan programs.
Between December 2020 and March 2022 the average mortgage rate on 30-year, fixed-rate mortgages jumped up by 149 basis points or 1.49%, whereas rates on 5/1 adjustable-rate mortgages increased by only 40 basis points for the same period. This increase in mortgage rate on FRM is incentivizing buyers to take out ARMs.
The slim supply of homes for sale is pushing up home prices, and there is a notable difference between young homebuyers, those aged 30 and below and older millennial homebuyers ages 31 and 40.
The nation’s overall mortgage delinquency rates have improved significantly over the last year, according to the latest CoreLogic Loan Performance Insights Report.