Business

2nd-home costs bounce in Aspen and Martha’s Winery because the prosperous flee megacities

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Anthony Hitt, CEO of Engel & Völkers Americas, was riding a four-wheeler around on his family’s 80-acre homestead farm in Missouri, where he’s working remotely these days, when he took my phone call to discuss luxury real estate. This was our first time chatting since we met—back when in-person was still a thing—in Midtown Manhattan in 2019.

When we last spoke, luxury units in cities like San Francisco and Seattle were still ablaze in bidding wars. But these days, the pandemic that dispersed recently transitioned remote workers, like Hitt, out of big cities to all corners of the country is creating a second-home boom.

“Business is heavy in vacation markets and second-home markets. People with the ability to buy in those areas are using those areas as getaways,” Hitt says.

From the onset of the pandemic, second-home markets, like the Hamptons, saw short-term rental prices spike as the affluent fled urban centers. But as the virus and office shutdowns linger on, homebuyers are now driving up prices in those second-home markets.

“They’re learning they can do their job as effectively [while working] remote,” Hitt says. So these second-home shoppers are making the long-term decision that their post-pandemic life will include a mix of in-office and remote work, he adds, and they’re taking the plunge and buying. “They want that Manhattan property but also that getaway in Park City [Utah].”

Looking at realtor.com data, Fortune analyzed real estate in the 103 zip codes with median price per square foot above $1,000—a.k.a. luxury neighborhoods. Among those places, second-home markets saw by far the biggest gains. In fact, nine of the 10 luxury zip codes with the biggest gains in median price per square foot are in second-home markets. Only San Jose’s 95129 zip code is not a second-home market.

The biggest jump in home price occurred in the 89402 zip code in Crystal Bay, Nev., where median price per square foot soared 72.2% year over year. Deep-pocketed Californians have long swooped in there to buy waterfront second homes with breathtaking views of the blue shores of Lake Tahoe. The pandemic has only intensified that trend in Crystal Bay.

At the onset of the pandemic, Northeast states like New York, New Jersey, and Massachusetts were the epicenter of the country’s fight against the deadly virus. So it makes sense that second-home markets in the Northeast were the first to boom. Prices per square foot jumped 30.6% in Chilmark, Mass. (02535 zip code), on Martha’s Vineyard, and 29.8% in Sagaponack, N.Y. (11962 zip code), in the Hamptons.

“The Hamptons, they are very busy right now,” Hitt says. And it isn’t just Sagaponack. The second-quarter report by Douglas Elliman finds median sales prices are up 27.1% in the Hamptons, to a record high of $1.1 million. Places like the Hamptons have a lack of inventory right now, so buyers are forced to bid up prices if they want to snag something.

Will this second-home boom last? The affluent were already becoming more inclined to incorporate more remote work and seek out second homes, Hitt says. The pandemic just accelerated that trend into the present.

But that doesn’t mean the “death of cities” narrative will come to fruition. Hitt thinks the well-off still want to live and work in San Francisco and New York. But they might downsize their city home, he says, so they can spend more on that second home in, say, Jackson Hole or Vail.

Surging prices for second homes also highlights a sharp economic divide: While prices in the Hamptons hit record highs, millions of Americans are facing eviction following the end of the federal moratorium on July 25.

More must-read finance coverage from Fortune:

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