Key facts
- Vacation homes are now difficult to sell, with many properties seeing significant price cuts.
- The market for vacation homes, once fueled by cheap loans and high demand for short-term rentals, has plateaued.
- Sellers who bought at the peak of the market are facing steep losses or lower-than-expected profits.
- Home values in some vacation markets, like Gatlinburg, more than doubled in a two-year span.
- Mortgage applications for vacation homes increased 30% in 2020 from the previous year.
- Demand for second homes peaked in March 2021 at 88% above pre-pandemic levels.
Vacation homes, once a highly sought-after real estate investment, are now proving to be a challenge to sell, with many properties lingering on the market and undergoing substantial price reductions. A two-bedroom cabin in Gatlinburg, Tennessee, listed for $850,000 in January 2024, has seen its price cut by nearly 30% to just under $600,000 as the seller 'chases the market.'
This shift comes as the short-term rental market, which fueled much of the vacation home buying boom in 2021, has plateaued. Investors and second-home owners are facing the realities of higher borrowing costs and the complexities of managing rental properties, leading to increased discipline and a greater willingness to sell. While many long-term owners may still see a profit compared to pre-2019 levels, those who bought at the peak of the market in 2021 and 2022 are now facing significant losses or lower-than-expected returns.
During the pandemic, fueled by low-interest rates and a surge in demand for getaways, vacation home markets experienced dramatic price appreciation. Mortgage applications for second homes surged, and demand peaked in March 2021 at 88% above pre-pandemic levels, with all-cash purchases further distorting the market. Home values in areas like Gatlinburg more than doubled, Big Bear Lake saw a 77% increase, and the Destin, Florida, metro area rose by nearly 50%. The short-term rental business also flourished, with double-digit percentage increases in bookings on platforms like Airbnb and Vrbo for three consecutive years starting in 2021.