The spike in demand for vacation homes that started during the Covid-19 pandemic began to take a sharp U-turn earlier this year as mortgage rates and home prices began to rise.
Real estate company Redfin reported that buyers have since been deterred from purchasing second homes after the federal government increased loan fees for these dwellings in April, adding roughly $13,500 to the cost of purchasing a $400,000 home. The stock market volatility, high inflation and recession fears were also deterrents.
But there is a silver lining for those still in the hunt for vacation homes. Portland, Ore.-based Vacasa, an international vacation rental management company, said that while rising median home prices are affecting capitalization rates—otherwise known as the cap rate, or the rate of return for a piece of property based on its income—buyers have more options to consider as new markets open up this year.
Vacasa said the trend among this year’s top market continues to be “drive-to waterfront destinations.” It noted that short-term rental buyers are most interested in beach markets, up 10% over 2021. Vacasa said sunny beaches dominated the list of 10 cities most searched for by guests in its “2022 Vacation Rental Search Report.”
Vacasa said its rental search report also shows that younger buyers are the majority, and millennials and Gen Z are willing to spend more than $400,000, a bit more than the older generations. But this year’s list features markets that offer prices that meet buyers’ financial goals and motivations.
Vacasa uses cap rate and data points such as median home sale price and annual gross rental revenue, along with key insights on today’s vacation rental real estate market, to create its ranking of top vacation rental markets.
Here is a list of the top 15.
15. Boothbay, Maine
Cap rate: 6.9%
Median home price: $413,000
Annual gross rental revenue: $55,743