Uptick in Second Mortgages May be a Sign of Economic Stability

Given that most of the news about the homebuying market these past few years has focused on violate financial markets, up and down home sales, and fluctuating interest rates, it may seem easy to overlook a basic question—is anyone diving into the housing market for a second time?

The National Association of Home Builders (NAHB) estimated Thursday that the total count of the second home stock was 7.5 million in 2014, up 600,000 from 2009, based on data from the Census Bureau’s 2014 American Community Survey. In addition, the share of second homes among the total housing stock also increased from 5.4 percent to 5.6 percent over the same time period.

NAHB reported that their estimates are based on the definition used for home mortgage interest deduction: a second home is a non-rental property that is not classified as taxpayer’s principal residence. This could include:

1. A home that used to be a primary residence due to a move or a period of simultaneous ownership of two homes due to a move
2. A home under construction for which the eventual homeowner acts as the builder and obtains a construction loan (Treasury regulations permit up to 24 months of interest deductibility for such construction loans)
3. A non-rental seasonal or vacation residence.

"It is worthwhile to understand the patterns of second homes because they could have a significant economic impact on local housing markets and thus have important policy implications," said Na Zhao, Ph.D. and Housing Policy Economist at NAHB.

The NAHB analysis found that the counties with the largest share of second homes are mostly tourist destinations.

Hamilton County, New York had the largest share of second homes at 79.3 percent. Forest County, Pennsylvania (74 percent) and Rich County, Utah (72.7 percent) had the second and third largest share of second homes.

In 913 counties spread over 49 states, second homes made up at least 10 percent of the local housing stock, with Connecticut and Washington D.C. as the only exceptions. NAHB reported that 357 counties, or 11 percent of all counties in the U.S., had at least 20 percent of housing units that were second homes.

Click here to view the complete analysis.