Americans are Buying Second Homes As Market Recovers

According to Fannie Mae’s report released Monday, titled “Second Homes: Recovery Post Financial Crisis,” the second home mortgage market is recovering after the housing market crash, and is expected to continue to grow. CF Funding is happy to share this sign of economic recovery. The Housing Insights report shared that second home mortgage origination has averaged about 4.6 percent of the total purchase market since 1998, and it has grown in the past few years. Fannie Mae and Freddie Mac have acquired about 64 percent of these second home purchase mortgages.

The National Association of Realtors’ survey of second home buyers, which was released last week, is used in the report to share general characteristics of second home buyers vs. those of primary residence buyers (those who have only one home). The typical second home buyer was profiled as about 47 years old, as opposed to a primary home buyer’s average age of 38. A second home buyer usually comes from a two-earner household and has a median household income of $90,660, whereas the primary homebuyer has a median household income of $74,580. The average second home buyer finances the purchase of their home about 61 percent of the time and usually puts down a larger down payment on their home than a primary homebuyer.

The increase in second home buying correlates with CF Funding’s April 2 article titled “Vacation Sales Rise Strongly in NAR Survey,” as the lender observed that more high-net-worth households gained enough confidence in the housing market to buy a recreational property last year. Fannie Mae also mentioned that “34 percent of all second home mortgages have been originated on properties located in Florida, California, and Arizona,” which makes sense as these states are located in warmer climates where many purchase vacation homes. Read the full CF Funding article here.

Fannie Mae also shared a history of the second home mortgage market, as the second home share of PMM has more than tripled from the late 90’s through about 2006, then declined through 2009. This is relatively consistent with the cycle of the real estate market. Since 2009, the second home mortgages share of all purchases has increased, as “private lenders are increasingly more willing to lend to second home borrowers.” During the housing peak (around March 2006), the share of second home mortgages peaked at more than 15 times its share compared to 1998 volumes, while other purchase mortgages were at less than 4 times their 1998 mortgages.

Although the population aged 45-64, who are most likely to buy a second home, is expected to grow more slowly than the rest of the adult population through 2060, it is still predicted that second homes will occupy a large part of real estate and mortgage business in the years to come. CF Funding looks forward to assisting second home buyers in financing their new home purchase. 

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