A crystal ball to give meaning to the real estate market right now


This article is reproduced with permission from The escape house, a newsletter for secondary owners and those who want to be. Subscribe here. © 2021. All rights reserved.

Real estate agents describe the second home market as “stuck”. To better understand what this means, I asked a few people in the industry to look at their crystal balls for me. We asked three questions of three housing experts. Edited excerpts:

EH: Buyers don’t feel quite the same urgency they did at the start of the pandemic, and sellers want the high prices they saw their neighbors get. Any thoughts on what will happen here?

Issi Romem

We are certainly no longer in the frenzied days of foreclosure-induced home buying, says Issi Romem, economist and founder of MetroSight, a real estate economics research firm. “… The great wave of adjustment to a new ‘pandemic state of the world’ has passed. In other words, the great single bulk of people for whom he newly made sense to buy a second home because of the pandemic acted on it, ”he said.

“Those who buy a second home now are a gradual flow of people coming to the conclusion that they can and want to buy a second home, as opposed to the point mass whose circumstances suddenly changed last year. And even though the pandemic state of the world means that the flow of second home buyers is now greater than it was before the pandemic, it’s probably still a trickle from that initial wave that has passed. “

EH: How do you see the funding for next year? We have lived in an era of low interest rates for so long. And yet the second home markets feel like cash is king.

Redfin CEO and Chairman Glenn Kelman reminds us that “the second home market is more dependent on the stock market than on interest rates, but rates generally affect the stock market. The prices go up. Some purchases are made by investors, but these people also borrow money. An era of very low interest rates made it easier to cash in a house.

His colleague Taylor Marr, deputy chief economist at Redfin, said: “Credit for second home purchases tightened in the spring and was recently eased again, which at least partly explained the sudden drop in March and the rebound that followed in September.

A recent report by the National Association of Realtors had the cash share of second home purchases from February through March 2021 north of 60%, according to MetroSight’s Romem: because “those 60% are wealthy individuals who buy cash, this means that the second the domestic market is probably less likely to see reduced demand as a result of a possible rate hike (although squeezing the remaining 40% could still hurt it). On the flip side, to the extent that those 60% are investors who seem to pay everything in cash but still use leverage (leverage that is unrelated to mortgages on individual properties that they buy), they could be sensitive if rates fall (or at least the investor pool won’t rebuild as quickly if rates rise; existing investors may have fixed rates). “

EH: To what extent is the buying of a home fueled by investors, whether serious or Airbnb superhost?

Until October, said Marr of Redfin, “we are still seeing high rates for second home mortgages. This data excludes pure investment property, but many of these second home / vacation buyers are certainly planning to use AirBnb or other services to offset the cost of ownership.

This article is reproduced with permission from The escape house, a newsletter for secondary owners and those who want to be. Subscribe here. © 2021. All rights reserved.


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