I spend a lot time working in and researching the second-home market. This week I read an article from a notable news source that basically headlined - second-home real estate market down 25%. Although it is basically true going back to January of 2022, the story goes a lot deeper and needs to be taken in proper context.
For two years, I watched the market in Horseshoe Bay which has a lot of vacation, second, and investment properties. Each month, inventory was consistently higher than the surrounding, non-resort, areas. After steadily rising month over month for the past two years, inventory peaked at over 12 months in July. Additionally, I took a listing this summer in Sargent - a beach town on the Gulf where there are a lot of second homes. Inventory crept up there throughout the summer as well. With inventory on the rise in two second-home towns and buyers becoming less active, it was evident that the second-home market was certainly depressed.
Over the last two months, however, we’ve started to see inventory fall in Horseshoe Bay. In September it dropped for the second month in a row to 10.8 months. I’ve also seen a slight uptick in online activity around my listings and I’ve received more calls about them as well. Perhaps one explanation is an increase in investor activity. Even though investor interest rates remain high, inflated inventory, anxious sellers, and the normal increase in off-season investor activity may be colluding to spur the second-home market.
The 25% decline referenced in the article points to percentage of market share of second-home sales. As previously mentioned, in January of 2022, second home closings comprised 22% of the overall housing market. Last month, it only comprised 16%, which is over a 25% decline. What it fails to mention is that second home market share actually hit its low a couple of months ago and is up from a 15% market share just last month. A second indication that the second home market may actually be heating up rather than hitting a new low.
Lastly, one final indicator of an improving second-home market is the increase in the number of cash buyers over the past couple of months, as much as 26% up. As you might expect with interest rates reaching 8%, there are more cash buyers right now than in the last couple of years, but it is also common to have many cash buyers in the second-home market. I would expect that the bump in cash deals last month were likely the result of more second-homes being purchased, relative to the overall housing market.
So, although closings on second homes is down 25% compared to January of 2022, there are several indications that the second-home market has gotten stronger in the past couple of months. I would not be surprised to see this trend continue, particularly if we see some further price weakening over the winter months. If you have been waiting to look for that vacation or investment property, now would be a great time to start your search.