How Vacation Home Mortgage Applications Soared at the Start of the Pandemic


  • Applications for second homes increased by almost 30% between 2019 and 2020.
  • The counties with the highest share of home purchase inquiries representing vacation home inquiries were Kane County, Utah, Nantucket County, Mass., and Grand County, Colorado.
  • The median value of vacation homes searched by applicants was 25% higher than those seeking a primary residence, but vacation home seekers also had more than double the median household income than primary residence seekers.

Mortgage applications for vacation homes rose nearly 30% between 2019 and 2020 as many homebuyers likely sought to take advantage of flexible working arrangements in the early stages of the pandemic, analysis shows. Zillow of 2020 data from the Home Mortgage Disclosure Act (HMDA).

Unsurprisingly, demand for vacation homes was heavily concentrated around coasts and mountain ranges in 2020, as those who could afford a second home sought to spend more time soaking up the sun or hitting the slopes. The counties with the highest share of home purchase inquiries representing vacation home inquiries were Kane County, Utah, Nantucket County, Mass., and Grand County, Colorado.

But while more borrowers were clearly willing to take a chance on getting a vacation home loan, the process itself remained more difficult than for primary residence buyers. the minimum down payment accepted by many holiday home mortgage lenders is generally 10% to 20%, which is why the typical down payment for holiday home applications was 20% across all age groups, which is above the median for all buyers. There are also often higher credit score requirements and debt/income thresholds. .

Yet more and more people are finding ways to make it work. The median value of vacation homes sought by these applicants was 25% higher than those seeking a primary residence, yes – but vacation home applicants also had more than double the median household income as applicants to a principal residence – $170,000 versus $79,000. It’s also worth noting that holiday home applicants are much older than primary residence applicants, with the majority of second home applicants coming from Gen Xers and baby boomers. About 70% of holiday home inquiries came from applicants between the ages of 45 and 74 and only 27% of those inquiries came from applicants under 44. In comparison, 66% of principal residence applicants were under 44 years old. do it on cheaper properties. The typical property value for applicants under 25 was $195,000, compared to $355,000 for applicants aged 35 to 54.

The disparities don’t stop at age. There are also haunting differences in the racial distribution of vacation home seekers. Only 2.3% of all vacation home buyers were black in 2020, a meager total of just 7,628 applicants nationwide. This compares to 222,096 applications from white applicants – 68.2% of all applicants. And black vacation home applicants requested homes roughly the same value as the median home of black main house applicants ($235,000).[1] Applicants of other races applied for more expensive vacation homes (applicants overall requested vacation homes worth $345,000 vs primary residences worth $275,000). And even though there are so few requests to buy Black vacation homes, and they are for relatively less expensive homes, the rejection rates were still surprisingly high compared to rejection rates in general. Black vacation home applicants were turned down 18.5% of the time, compared to 7.9% for all applicants and 6.6% for white applicants.

Another consideration for buyers looking for vacation homes is the recent increase in upfront costs by Fannie and Freddie. This new fee addition ranges from 1.125% to 3.875% of the total loan value, which is no small amount considering that the median loan value for a vacation home in 2020 was $255,000. This fee increase could add anywhere from $2,870 to $9,880 in upfront costs for a vacation home with a loan of this value – potentially adding height to an already high hurdle for those struggling to save a down payment and other upfront costs, especially first time buyers and color buyers. And given the rapid increase in home values ​​since 2020 (the last year for which data is available), the overall effect of these fees on today’s buyers is even greater.

Investment properties

The rapid increase in home price appreciation over the past year and a half should intuitively have translated into an increase in the purchase of investment properties, since the yield is very favourable. But the HMDA data doesn’t tell that story. Between 2019 and 2020, there was indeed a 6% drop in the number of mortgage loan applications for investment. This does not mean that there were fewer people buying investment properties, but rather that there were fewer people buying investment properties with mortgages. The rise of the cash buyer has sidelined many potential first-time investors who must adhere to strict investment property mortgage guidelines.

Like vacation homes, real estate investment mortgages have more requirements than primary residence mortgages. The typical down payment on investment property applications was 25%, matching exactly the minimum down payment required by many real estate investment mortgage lenders. But the good news is that investment properties are generally cheaper than primary residences and much cheaper (around 50% less) than vacation homes – investment properties are often more run down or in need of repairs, which which represents a boon for investors looking to fix and flip. So the bar is lower for people to access second home ownership via an investment loan instead of a holiday loan – if they can win the offer.

Typical investment property applicants had higher income than primary residence applicants in 2020 ($132,000 vs. $79,000), but the property value for the typical investment residence application was 14.5% lower than that of a main residence. And unlike holiday home seekers, investment seekers are more likely to be younger – with almost half (44.7%) of property investment seekers under the age of 44. And the refusal rates are quite similar across ages (with the exception of applicants under 25, who had a 13.7% refusal rate compared to 9-10% for other age groups) .

[1] With the exception of Asian applicants, who asked for much cheaper vacation homes ($385,000 for the median vacation home value versus $435,000 for the median primary home value). This is likely due to the fact that Asian households are more likely to live in more expensive subways with higher home values, and many mortgage lenders require vacation homes to be some distance from applicants’ primary residence, which would be in lower-cost areas. It is therefore likely that Asian holiday home seekers will apply in cheaper areas.

Previous Zimbabwe: "A sustainable tariff, key to reliable electricity"
Next Bitengen Passes One-Year Milestone by Positioning Itself as a Top 100 Crypto Exchange