Coachella Valley’s Second-Home Market. I recently blogged about the demand for second/vacation homes have been increasing over the last year, especially with people sheltering in place because of the pandemic.
However, now with the increase of interest rates and loan fees, the second home market seems to be slowing. The good news is that housing analysts predict the demand for second/vacation homes will remain above pre-pandemic levels and are still 13% above what they were before 2020.
According to a recent article in the REALTOR Magazine, “The pandemic-driven surge in sales of vacation homes is coming to an end as mortgage rates rise at their fastest pace in history, causing some second-home buyers to back off,” says Taylor Marr, Redfin’s deputy chief economist. “When rates and prices shoot up so much that a vacation home starts to look more like a burden than a good investment and a fun place to bring your family on the weekends, a lot of prospective buyers have second thoughts.”
The Second-Home Loan Fee
The other thing that could be deterring the Second Home market is the Federal Housing Finance Agency increased a “second-home loan fee” by 1% to 4% which took effect the first of this month. This fee could add $13,500 to the cost of purchasing a $400,000 for second-home buyers – more if the purchase price is above that.
Even though second home buyers are facing interest rates heading to 5% on the average and home prices continue to increase at the same time inventory is still extremely low, interest in second homes is still high and remains solid.
What does this mean for you buying your second home in the Palm Springs and La Quinta area? If you don’t have to finance it and pay cash, you’ll avoid the second-home fee.
However, you’re looking to purchase your second home in the Coachella Valley and thinking about financing your purchase; buying right now will be better than waiting until the “market cools off”; because it won’t anytime soon.
According to The Mortgage Reports, “I expect home prices to rise, on average, up to 10% this year,” Ailion says. “Some markets will see lower appreciation rates while others will see higher appreciation rates, with the Sunbelt doing exceptionally well.”
Other analysists predict home values will continually increase as long as the inventory stays low, predicting home growth could increase upwards to 16.4%.
If you’re looking to buy your second home in the Desert, let’s talk about your options. I have seen many many markets over the years and have the experience to provide you with the information you need to make the best choice for your situation.