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Investing in Fractional Ownership Amidst High Mortgage Rates

by | Oct 2, 2023

In the current real estate landscape, high mortgage interest rates continue to raise important considerations for potential buyers eyeing fractional (co-ownership) vacation homes. One common adage in real estate, “Marry the property, date the rate,” resonates strongly in this climate. This phrase encapsulates the dilemma posed by the unpredictable interest rate scenario. However, the real question is, should this uncertainty deter prospective buyers from considering fractional ownership vacation homes?

Current Real Estate Market Dynamics

We are witnessing an interesting equilibrium in the real estate market, with both demand and supply experiencing a downturn. High interest rates have sidelined many primary home buyers and investors, resulting in fewer bidding wars. Despite this, the reduction in supply due to an unwillingness of people to let go of a current lower interest rate mortgage on top of slow-paced residential construction has balanced the equation. Overall, the U.S. currently faces a 5.5 million-unit housing shortage, a gap that new construction is barely bridging.

Anticipating Interest Rate Movements

It’s a matter of speculation whether interest rates will trend downward or continue to rise. The prevailing high interest rates have instilled a sense of hesitancy among investors. However, this uncertainty could be an indicator that it might be the right time to invest, especially in fractional vacation homes. Potential investors in home buying have financing tools at their disposal, including rate and term refinance products, allowing them to strike a deal now and refinance when rates decrease.

Advantages of Fractional Vacation Home Ownership

Fractional vacation home ownership emerges as an attractive option in this market scenario for multiple reasons. It offers a lower initial investment, enabling a more affordable entry into the real estate market and diversification of investment portfolios. Moreover, shared maintenance and operational responsibilities associated with fractional ownership significantly mitigate risks and hassles, making it an attractive alternative.

Navigating Economic Indicators

Despite the high interest rates, the economic landscape remains promising with a strong job market at 3.8% unemployment as of September 2023. The Federal Reserve’s commitment to controlling inflation signals a potential future cut in interest rates. Once this happens, demand is likely to surge, leading to a corresponding increase in housing prices. Investing in a fractional vacation home now could mean securing a property at a lower price, with the opportunity to refinance at a lower rate in the future.

Strategic Approach to Investing

Investing in a fractional vacation home in the present market could prove to be a strategic move with the current decreased demand. Future refinancing opportunities provide an appealing option for investors seeking to maximize return on investment (ROI). It’s crucial to weigh the benefits of a lower purchase price now against the potential of lower interest rates in the future, all while considering the long-term advantages of current investments.

The advantages of fractional ownership, coupled with the promise of a strong economic landscape, make it an opportunistic choice amidst market uncertainties. It’s time to embrace the wisdom in being “greedy” when others are “fearful” and consider seizing the opportunity that fractional vacation home ownership presents. Rates may not decrease, given the historical norms we’re experiencing; they may, in fact, rise. Buying now allows you to lock in both the price and the rate. Whether rates go up or down, you have the chance to ride them in your favor, all while creating enduring vacation memories with your new property. 


This post is co-written with our loan partner Daniel Ramirez, Co-Founder of Host Financial.

Host Financial

Host Financial is the leading lender for Short Term Rental Investors since 2018. Host’s forward thinking approach to underwriting allows investors to qualify for a 30 year mortgage using the property’s STR income instead of their own. With no tax returns or personal income verification needed, this lite-document approach allows for quick closes and hassle-free underwriting to ensure the financing portion of the purchase process is the one you won’t have to worry about.

  • No Credit Pull Required to Generate a Quote
  • $500 Processing Fee Waived For Plum Customers That Move Into Underwriting
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