Vacation home sales have surged the last two years coinciding with an increase in remote work opportunities. As demand for homes in vacation destinations surged prices have responded; some areas seeing 60+% increase in home values. As vacation home demand cools; affecting Sun Valley, Idaho homes. Will prices finally stabilize in Sun Valley, Idaho?
Sales of Vacation Homes Cools Nationally
A recent article by Mansion Global suggests the buying spree on second homes may be coming to an end. Surging prices and rising interest rates may be to blame for the cool down.
Is the pandemic surge over?
During the pandemic, vacation homes became part-time primary homes for many taking advantage of remote work opportunities.
As the pandemic rush to purchase vacation homes comes to an end, will surging prices in these vacation destinations recede? It remains to be seen how these factors will affect Sun Valley Idaho homes.
Increased fees for vacation home loans
A new Federally mandated increase in loan fees for second homes came into play on April 1, 2022. Second home loans now incur a fee of 1%-4% which can further increase the cost of securing a second home.
Couple these fees with surging interest rates
Mortgage interest rates for vacation home loans are typically 0.5% higher than loans for primary residences. In fact, mortgage interest rates are rising at their fastest pace in 35 years reaching 5% in April 2022 from a record low of 2.8% in January 2022.
Mortgages for second homes are more conservative
Lenders are typically more conservative on mortgages for vacation homes. Most will require a minimum of 20% down and more if you are applying for a jumbo loan. Lenders will carefully analyze your debt to income ratio as well.
What about cash buyers?
Nationally, around 30% of second homes are purchased with cash and this is similar to Sun Valley area sales.
Vacation homes sales are influenced by the stock market rather than interest rates, especially in top tier markets.
Cash buyers shouldn’t be as affected with an increase in mortgage rates, but overall sales should slow with a significant increase in mortgage rates and fees.
Vacation home sales still above pre-pandemic levels
Despite the recent slow down, demand for second homes in March 2022 is 13% higher than before the pandemic.
Compare this with demand for second homes in January 2022 at 87% above pre-pandemic levels.
Vacation home demand is stabilizing along with COVID, which should also stabilize prices.
Sun Valley Idaho Homes
How do mortgage rates and second home demand affect Sun Valley, Idaho homes? We are seeing record low inventory and continued buyer demand into Spring 2022.
Many new listings are receiving multiple offers and bidding up in price.
Overall, real estate is moving slower due to low inventory.
Vacation demand in Sun Valley, Idaho
Another way to measure demand in the Sun Valley area is to view occupancy reports for nightly lodging. March 2022 occupancy was up 42% from 2021.
Reservations into summer 2022 are outpacing 2019 indicating we should expect a very busy summer ahead.
I have heard over and over again, “We came to vacation here and never wanted to leave”. While many vacationers don’t relocate to Sun Valley, more visitors to the valley increasingly puts us on the map.
Call us today to set up your first appointment in the Sun Valley area: (208) 721-4131
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