Second Homes Still a Hot Commodity
Work from Anywhere?
One shift in real estate during the pandemic has been a jump in second home purchases. This looks to continue, as multiple factors are driving the trend. Work-at-home arrangements look to be a permanent option for many office-based jobs. Interest rates remain low. And, homeowners have access to considerable built-up equity in their current homes which can be used for investments in more real estate.
“A combination of permanent remote-work policies and record-low mortgage rates is contributing to an uptick in demand, with buyers racing to snag vacation homes before interest rates increase further,” noted Taylor Marr, chief economist for real estate agency Redfin.
Additionally, the pandemic has caused many to rethink vacation priorities, switching from sojurns in crowded hotels, resorts, and cruise ships to peaceful, vacation-home getaways which can be accessed by family members anytime of year.
Improved home equity situations and reduced primary residence costs have put more buyers within reach of making a second home purchase. With home prices rising dramatically over the last several years, many homeowners have seen a big increase in home equity. And, many have refinanced, lowering the cost of their current loan. This helps many to access cash and qualify for a loan to buy a second home.
On the other hand, prices are up strongly. And ongoing demand will likely keep prices firm, given short supply and still-attractive interest rates.
Second homes are not the same as investment properties from a mortgage standpoint. Investment properties can be multi-unit and are generally occupied by renters full-time (or they can be commercial properties). The minimum down payment and credit scores required both these types of properties is a bit higher, but now within reach for many current homeowners.
Second homes need to be at least 50 miles from your current residence, and you can use them for vacation or for work. They need to be a one-unit property and cannot be a timeshare. You’re free to rent it to others, but for IRS purposes, you need to live there at least 14 days per year or 10% of the total days you rent it to others. It’s also common for owners to turn their second homes into investment. properties at some point, if permitted by their mortgage terms.
As we start 2022, we’re seeing some urgency for second home buyers. Fannie Mae and Freddie Mac have announced increases in the fees associated with second-home loans. These new fees are scheduled to go into effect April 1.
This is definitely a consideration for near-term buyers! As everyone in real estate knows, “time is of the essence!” If you have a second home purchase on your radar, contact us to do all the math needed to investigate such a purchase, get you pre-approved and out making offers!
Quarterly Newsletter - Spring 2022
Enjoyed this article? Get the latest mortgage industry news. Click here.
Copyright © 2022 Myers Capital Virginia.