Last month saw a huge spike in demand for second homes all around the country. Second home, or vacation home, purchases increased by 60% in the month of September 2021. The initial phases of the pandemic ushered in a renewed market for vacation properties throughout the country, as people were eagerly looking for places to spend quarantine or new locations to work remotely from. This fueled the Florida Keys real estate market into overdrive, as many sought out our tropical paradise as their refuge.
Nationally, however, the market for second homes slowed as restrictions were lifted and the initial rush cooled. Particularly this summer, when markets across the country saw a slowdown in vacation home purchases. Experts believe a big part of this summer slowdown was caused by the announcement of a new rule by Fannie Mae which reduced and set restrictions on the amounts of investment properties and second home loans it would purchase. The new rule effectively made it more expensive and difficult for homebuyers to acquire loans on second home purchases.
In September, however, the market is heating up again. So what is causing the spike? It is likely that the quick increase in demand is twofold. First, buyers may be settling their response to Fannie Mae’s announcement and are feeling more confident than in the initial months following. Arguably the biggest factor fueling the demand for second homes is the increasing mortgage rate. October 2021 has seen the average interest rate on a 30 year fixed mortgage increased to above 3% for the first time in many months. Economy experts believe that the interest rates will continue to rise due to rising inflation and the fact that the Federal Reserve is set to reduce its bond purchases in the coming months. These factors combined should keep the interest rates going up, according to economic strategists. It is estimated that the mortgage interest rate average for the next year could be between 3% and up to 4% nationally. These estimations could be driving those looking to purchase homes for sale in the Florida Keys as investment properties or second homes to purchase now, before the rates go even further.
Second houses and vacation homes make up a large portion of the Florida Keys real estate market. These national trends are evident here in the Keys as well, and continue to keep the market thriving. How far these trends will continue to hold up should become clear in the coming months.