As a follow-up to my recent post about the rise of the second home, here is a chart (via the WSJ) showing second home and investor mortgage applications as a share of all applications in the US. In February of this year (2021), second home and investment properties accounted for 14.1% of all applications. This is a record number going back to January 2010.

What's also interesting about this chart is that, but for COVID, it shows a general decline over the last decade. I'm not sure what the split is between vacation and investment properties, but can we conclude that pre-COVID Americans were becoming less interested or perhaps less able to own a second home? And could the reason be that instead of owning a second home, more people simply started relocating permanently?

There is also an obvious seasonality to these applications. Each of the above valleys tend to correspond to the spring and summer months. It's almost as if every fall/winter we start thinking to ourselves, "Right, winter. Let's look for a place somewhere else." Is it that, or are there other forces at work here?

This pandemic seems to have been good for real estate located in places that people like to spend time in, but maybe had to limit their time there in the past because of things they had to do like, you know, work in an office. This includes everywhere from "cottage country" outside of Toronto to sunny destinations like Miami.

Here are some figures that I came across for South Florida via Analytics Miami. Comparing November 2020 to a year prior, condo transaction volumes in Miami-Dade country are, interestingly, up 4.3% for condos less than $1 million and up 61.4% for condos worth more than $1 million.

Somewhat similarly, single family home transaction volumes in Miami-Dade county (for the same time period) are down 5.2% for houses worth less than $1 million and up 100% for houses worth more than $1 million.

Sometimes you see a decline like this (the -5.2%) because there simply aren't enough houses on the market for less than $1 million. But it could also be that more rich people are looking for expensive properties in Miami compared to last year.

As you may have gathered from here and here and here, I'm not all that bullish on the permanency of this whole working from home thing. But there's no denying that there's a very clear trend around people moving to places that are warmer. This was happening well before COVID-19.

There is also some evidence that rich people are starting (continuing?) to eschew high tax states like California for lower tax states like Florida and Texas. I don't have the data to be able to comment on how meaningful this trend is, but, for whatever it's worth, apparently Elon Musk just moved to Austin.

Photo by aurora.kreativ on Unsplash