According to a new report from Redfinhdemand from second home and investment property buyers increased 87% from pre-pandemic levels in January– the highest level in a year, and just short of the record 90% gain in September 2020. Demand for mortgages for second homes exceeds demand for primary residences, which is up 42% from levels in before the pandemic.

Growing interest in vacation homes began in mid-2020, as more affluent Americans took advantage of remote work and low mortgage rates to get away and invest in vacation destinations. JAlthough demand remained well above pre-pandemic levels, it decreased last spring before rebounding in the fall.

“Demand for second homes was strong in January as buyers tried to lock in relatively low mortgage payments,” said Redfin’s deputy chief economist. Taylor Marr. “Mortgage rates rose above 3.5% in January for the first time since March 2020, encouraging buyers who were hesitant to buy a vacation home to commit before rates rise further.”

The holiday boom has also affected house prices in seasonal towns with rates up 20%, outpacing non-seasonal towns, and is expected to continue through 2022. A seasonal town is defined as an area where more than 30% of dwellings are used for seasonal or recreational purposes, according to the 2019 census.

Second homes are often located in seasonal towns, where the sale price of homes increases more than prices in non-seasonal towns. The typical home in a seasonal town sold for $501,000 in December, a 20% year-over-year increase, marking 18 straight months of double-digit price growth.

Meanwhile, in non-seasonal cities, the median sale price rose 13% year-over-year to $408,000. The number of homes for sale in seasonal cities fell 29% in Q4, compared to a 16% decline in non-seasonal cities. Experts say demand from second home buyers is likely contributing to stronger price growth and tighter inventory in seasonal areas.

“While I expect demand for second homes to remain higher than it was pre-pandemic, primarily due to remote working, it may decline slightly over the coming year. as mortgage rates continue to rise and second home loan fees increase,” Marr said.

Redfin economists predict that the average 30-year fixed mortgage rate will rise to 3.9% during 2022.

Click here to read Redfin’s analysis of second homes and vacation homes.