Record Second-Home Purchases Fueled by Bay Area Wealth
December 29, 2021
California Follows U.S. Trend in Demand for Vacation Homes
LOUIS HANSEN | firstname.lastname@example.org | mercurynews.com
It should have been a nightmare house tour in Napa — a neighbor’s giant, calamitous construction project with dump trucks and heavy machinery rumbling past a multimillion-dollar home for sale.
The listing price for the modern, 6,000-square-foot home on a large, rural lot was north of $5 million. But buyer after buyer told Napa agent Damian Archbold they were looking for a second home, mostly for weekends in the country. They would rarely see or be bothered by their neighbor’s lengthy construction project.
Demand was high, Archbold said: “I could have sold it four times that day.”
Sales of second homes have reached record levels in 2021 as homeowners and professionals flush with cash have fully embraced remote work during COVID-19 and invested in real estate.
Redfin reports that second-home sales in the U.S. jumped 70% in October from pre-pandemic levels, another strong month in a record year. The second home market peaked in January when sales almost doubled from early 2020.
“It’s unprecedented,” said Redfin chief economist Daryl Fairweather. “This is the highest jump on record.”
The online brokerage used mortgage reporting data to track a national wave that California agents have been riding. Second-home sales in California leaped 54% in 2021 from pre-COVID levels, according to a survey by the California Association of Realtors. The association estimates about 35,000 vacation and second homes will be sold this year, making up about 6.6% of the state’s sales.
Demand in California is fueled by low interest rates and a strong stock market.
The boom in demand for second homes highlights a growing economic disparity, especially in the Bay Area. While high-income buyers shop for second homes, many first-time buyers struggle to save for a downpayment on a $1 million home — the nine-county region’s median price for a single-family home.
Just 1 in 5 Bay Area families can afford the median-priced home, the lowest level since the beginning of the mortgage lending crisis of 2007, according to CAR. A typical Bay Area household needs a $235,000 income to afford a home, up 21% from last year.
But steep prices have not slowed wealthy buyers. Agents say tech professionals, typically with two incomes and healthy stock portfolios, are returning to buy in regions where they once just vacationed.
Tech buyers typically keep a foot in San Francisco while buying single-family homes with extra bedrooms, Zoom-rooms and large lots in rural farming communities, foothills and lakefronts.
Sales prices in some Lake Tahoe communities have nearly doubled from pre-COVID levels. The inventory of homes for sale has plummeted 90% since the beginning of the health crisis, according to local real estate data.
Compass agent Dave Marriner of Incline Village said the demand has been unprecedented in his 40-year career. “People have decided, I can work from home,” he said. The typical buyer is a tech professional between the ages of 30 and 50 with a family.
The median price for a home in Incline Village, on the Nevada side of the lake, has climbed 80% since the beginning of the pandemic, to $1.37 million. Between 50 and 75 homes are for sale at any given time “being chased by a lot of money,” Marriner said.
Bidding wars once found mainly in Silicon Valley hot spots have spread to the resort. Panicked buyers are offering 20% above the asking price, he said, although the demand has slowed slightly in recent months.
Many families have decided to keep homes or condos in the Bay Area, he said, adding, “I don’t see all of these people moving back to the city.”
Cupertino agent Ramesh Rao has clients seeking retirement homes in the Bay Area. They’re buying a second home a few years before they leave their careers, he said, and renting it out until they’re ready to retire.
The wine country has proven another popular spot for aging baby boomers looking to retire. The region has the appeal of small-town safety and charms with sophisticated restaurants and culture, Archbold said. Other buyers are simply looking to get back to the soil, perhaps planting a few vines and gardens.
Archbold said many second-home buyers start out with a foot in Silicon Valley and another in Napa. But, he said, “it doesn’t take long before they ask, ‘Why are we still going into the city?’ “
Categorized in: Bay Area Real Estate