Vacation-home demand was expected to remain sluggish, as the broader housing market was marred by elevated mortgage rates and weaker transaction activity.
However, according to new Redfin data, there’s an unexpected shift in one corner of the housing market, breaking a trend that has held up since the pandemic boom.
Though at first it looks like the beginnings of a recovery, the underlying data paints a more complicated story.
The change comes from one of the market’s weakest starting points and is spearheaded by a remarkably narrow group of buyers.
Rather than indicating whether housing affordability has improved, the shift reveals where purchasing power is returning first and which Americans remain shut out.
	Thomas Northcut
What the vacation-home rebound really says about housing
Redfin found that demand for vacation homes jumped in 2025 for the first time since the pandemic boom, as second-home mortgages grew more quickly than loans for primary residences.
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Naturally, stronger vacation-home demand indicates improving consumer confidence, with households usually making such decisions when they’re feeling much more secure about their income, wealth, and the economy.
However, if we dig into the numbers, that rebound could be much smaller than the headline numbers suggest.
Second-home originations rose from 86,870 to 90,413, so the entire gain was basically just 3,543 additional mortgages. Activity remained about 50% below 2019 levels and roughly 65% beneath the 2021 peak.
Additionally, second homes formed just 2.7% of all mortgage originations, compared with 5.1% in 2021.
So basically, the gain has just recovered about 2% of the drop from 2021 to 2024.
Put simply, it indicates that the affluent buyers have become more active again, while ordinary households still remain priced out of buying even one home.
It’s worth noting, though, that HMDA covers mortgage originations, not necessarily every home purchase.
It excludes those paying entirely in cash, which is highly relevant when analyzing affluent buyers. National Association of Realtors data shows 57% of vacation-home buyers paid entirely in cash, compared with just 18% of primary-residence buyers.
Also, the report measures the financed second-home market, not the full vacation-home market.
America’s housing recovery is increasingly reserved for the wealthy
The “K-shaped economy” discussion has gained a ton of steam lately, and Redfin’s report essentially throws more fuel on that debate.
In fact, I recently covered a Bank of America research note on the economy. In its midyear outlook, the bank described the U.S. economy as K-shaped, calling it “reflation for higher income, stagflation for lower income.”
For perspective, Redfin found that 85.2% of second-home mortgages were attributed to high earners boasting a median income of $294,000.
That is a remarkable 3.3 times the overall U.S. household median of $88,000.
The typical financed second home was worth $515,000, about 30% more than the $395,000 typical primary home. Buyers aged 45 to 64 received nearly 59% of the loans, which added more colour to the picture of older households with accumulated income, stocks, and financial assets.
Additionally, the broader market confirms that split.
Luxury home prices shot up 4.7% year-over-year in May, compared to 1.5% for non-luxury homes, backed up by demand from affluent buyers. Consequently, the national median sale price reached a record $408,776 in June.
The financing calculation adds more weight to that argument.
So, for a 20% down payment on a $515,000 property, a buyer will need to finance approximately $412,000. At the recent average 30-year mortgage rate of 6.58%, as reported by Freddie Mac, the principal and interest would be about $2,626 per month, before taxes, insurance, maintenance, and association fees.
Additionally, even with modest estimates for those, there are additional costs that could push the annual carrying cost above $40,000, excluding the initial $103,000 down payment and closing costs.
If we take a 3% pandemic-era rate, that same loan would cost nearly $1,737, which means today’s payment is roughly 51% higher.
The comeback is selective, not a nationwide vacation-home boom
Redfin’s metro-level data shows that the recovery in second-home demand is quite uneven.
For perspective, West Palm Beach recorded the highest concentration of second-home mortgages, at 5.5% of all local originations. New Brunswick, which includes the Jersey Shore, followed at 4.6%, while Riverside, which includes Palm Springs, stood at 3.8%.
It’s important to note that these markets are best described as established seasonal luxury destinations, where affluent buyers often view a second home primarily as a lifestyle purchase.
The motivations for buying these properties may have less to do with rental income and more to do with privacy, family access, and seasonal use.
Moreover, some of the fastest-growing metros look less impressive once the numbers are put into context.
Montgomery County, Pennsylvania, posted a 28.8% increase but recorded only 103 second-home mortgages in total (implying just 23 additional loans). Indianapolis rose 26.6%, but the increase amounted to only about 58 mortgages.
Meanwhile, several recognized vacation and investor markets moved sharply in the opposite direction:
- Las Vegas: down 20.9%.
- Los Angeles: down 19.8%.
- Orlando: down 14.5%.
- Tampa: down 13.8%.
- Miami: down 10.5%.
Markets like Orlando, Las Vegas, and Tampa usually attract buyers who’re expecting short-term or long-term rental income to offset mortgage payments, insurance, taxes, maintenance, and association fees.
When those costs jump, or we see a slowdown in rental returns, the investment case deteriorates quickly.
High-profile purchases in affluent vacation-home markets
- Oracle co-founder Larry Ellison paid $173 million for a 16-acre oceanfront estate in Manalapan, Palm Beach County, in 2022.
- Valve co-founder Gabe Newellpaid $70.8 million for a Manalapan waterfront mansion in June 2026.
- Justin and Hailey Bieber bought a $16.6 million vacation home in La Quinta in late 2023.
- Kourtney Kardashian reportedly paid $12 million for a La Quinta property in 2021.
- Leonardo DiCaprio paid $5.23 million for Palm Springs’ former Dinah Shore estate in 2014.
Sources: Forbes, Architectural Digest, The Washington Journal.
What buyers and sellers should watch
The data is clearly showing that the market isn’t improving evenly.
For affluent buyers in Florida, New Jersey, and California, competition is likely to remain elevated in lifestyle markets such as West Palm Beach, the Jersey Shore, and Palm Springs. On the flipside, lower- and middle-income buyers are unlikely to gain much from this supposed rebound, as they remain remarkably exposed to mortgage rates, down payment constraints, and monthly ownership expenses.
Sellers in wealth-driven destinations might find enough buyers who are willing to pay for scarcity and personal use.
However, sellers in investor-heavy markets should be cautious, and those properties might require a lot more realistic pricing or concessions.
The broader housing market remains restricted. According to NAR reporting, existing-home sales ran at a 4.09 million annual pace in June, while the median price surged to $440,600, and available supply stood at 4.6 months.
Relief depends a ton on borrowing costs. The average 30-year mortgage rate stood at 6.58% on July 23, making the Fed’s July 29 decisionand the subsequent bond-market reaction important catalysts.
Buyers should monitor mortgage rates, local inventory, price reductions, and insurance quotes. Sellers need to track competing listings and days on market.
Until rates decline or incomes catch up, wealthy buyers seem to have all the flexibility, while everyone else might need to negotiate harder or wait.
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