A vacation on home turf? Vacation home sales are down 50 % from pre-pandemic levels.

The hottest segment of the real estate market that was previously the focus of the pandemic is now cooling off. According to a new report from Redfin, the trend of high demand for vacation homes, driven by increasing remote work and low mortgage rates, has reversed. In March, loan rates for secondary homes fell 52% from pre-pandemic levels, while the decline for primary homes was 13%. Secondary home rates fell to their lowest level since 2016 in February and were virtually unchanged in March.

This contrasts with the situation in 2020, when the pandemic sparked huge demand for secondary homes as high-income buyers took advantage of historically low mortgage rates and high levels of savings. Sales of existing homes in counties with a share of vacation homes of at least 20 percent grew an average of 24 percent in 2020, twice as much as in counties with few such homes, according to a 2021 report by the National Association of Realtors. Vacation home sales are up nearly 17 percent in 2020 and 33 percent on a year-over-year basis from January through April 2021.

"There's a huge shift right now because of high interest rates and the overall economic situation," said Daryl Fairweather, chief economist at Redfin.

"People are worried about a recession, and during a recession the first thing to go down is minor purchases like secondary homes." Secondary home loan rates peaked at 89% above the pre-pandemic level (average of January and February 2020) in August 2020. Compared to August 2020, when mortgage rates for secondary homes peaked, loan rates fell 75% in March. This coincides with the average rate on a 30-year fixed mortgage dropping to less than 3% in July 2020, and mortgage rates hovering around 6.6% in mid-March of this year.

Who's buying secondary homes?

According to Redfin agent in Phoenix, Van Welborn, it's mostly high-income buyers who aren't worried about high interest rates. "They are motivated to buy now because they believe they can get a vacation home for less than the asking price. "

Demand for secondary homes is also down from last year and from January 2022, when mortgage rates began rising from historic lows. Through March, the number of locked mortgage rates on secondary homes was down 49% from a year ago and 71% since January 2022. The number of blocked mortgage rates on mainstream housing fell 29% year-on-year and 35% from January 2022. Remote work opportunities have begun to decline and with them the ability to spend more time in secondary housing, making them less attractive.

In March 2022, more than 20% of all paid job ads were focused on remote work, up significantly from less than 10% in January 2021. But that growth was quickly followed by a sharp decline, according to LinkedIn. In November 2022, only about 14% of paid job postings on LinkedIn offered openings for remote work.

Swapna Venugopal Ramaswamy is a housing and economics correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our daily money newsletter here.