Yahoo Finance Grant Cardone's Prophecy Rings True: U.S. Mortgage Drop Bolsters Warning On Short-Term Rentals
U.S. homebuyers took out 40% fewer mortgages in 2023 than they did a year earlier — a figure that appears to be proving real estate mogul Grant Cardone's warning to avoid short-term rental properties is correct.
Cardone told his followers on X to steer clear of short-term rentals, stating in an April 27 post, "Real estate is a long-term investment designed to create generational wealth, not a get-rich-quick vehicle."
Mortgages for second homes are down 65% from the height of the pandemic housing boom in 2021, according to a Redfin analysis of Home Mortgage Disclosure Act data.
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In comparison, mortgages for primary residences dropped at half that rate, falling 20% year over year in 2023 and 35% from 2021.
Mortgages for second homes dropped more than for primary homes for several reasons
Second homes tend to be more expensive — a typical vacation home was worth $475,000 in 2021 compared to $375,000 for primary homes. The federal government also increased loan fees for second homes in 2022, making it more costly to buy one.
Vacation homes are not an essential as primary homes are, so when prices rise, many prospective buyers back off.
Renting out a second home is less attractive because the market has softened from its pandemic peak and properties generate less revenue.
"Soaring prices pushed down demand for vacation homes last year, both for cash buyers and those getting a mortgage — but the latter pulled back even more because high rates exacerbated high prices," Phoenix Redfin Premier agent Heather Mahmood-Corley said. "There has been a small uptick in interest in second homes this year, mostly from cash buyers who plan to eventually move in full-time. People who would need a mortgage are still sitting on the sidelines, waiting for rates to come down — especially because rates are typically high even for second homes than primary homes."
With many companies requiring their employees to return to the office, there's less time to spend at a vacation home.
Starwood Capital Group CEO Barry Sternlicht recently said that as the labor market softens more employees are returning to the office voluntarily because "there's nothing like being together."
Vacation home demand hasn't picked back up this year, according to the Redfin report. Mortgage-rate locks for second homes have been near their eight-year lows since the beginning of 2024. They declined 7.3% from April a year ago. Rate locks for primary homes declined by 1.6%.
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This article Grant Cardone's Prophecy Rings True: U.S. Mortgage Drop Bolsters Warning On Short-Term Rentals originally appeared on Benzinga.com
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