Why I'm Holding Off on Buying a Second Home -- Despite Having the Down Payment

We saved aggressively for a second home, but here's why those plans are on pause right now.

Years ago, my husband and I got an idea in our heads -- wouldn't it be great to buy a vacation home for our family? It would give us a place to stay in one of our favorite go-to spots, and it would also be an investment.

Of course, buying a second home costs money, so for the past several years, my husband and I have diligently socked away funds for that purpose. We've given up a lot of things to come up with a down payment on a second home. For example, we chose budget road trips over higher-end vacations and limited our spending in other areas, like restaurants and entertainment.

But despite actually having a down payment for a second home, we're holding off on buying one right now. Here's why.

1. Home prices are too inflated

Although mortgage rates are pretty competitive these days, home prices are extremely inflated on a national level. And that extends to the area we're looking to buy in. In fact, in the specific area we're targeting, I'd say that asking prices are easily $50,000 to $75,000 higher than what they were before the pandemic, during which time home values soared. As such, the money we have set aside for a down payment won't get us as far, and we don't want to take on too high a mortgage.

2. There's not enough choice

One of the reasons home prices have climbed so substantially is that housing inventory has been extremely limited over the past year. In the area we're looking to buy, there are maybe three or four properties for sale within our price range, whereas in a normal year there would easily be 12 to 15. Plus, the homes we have been seeing don't meet our needs. They're either too small, too expensive, or they need too much work. And since we're limited on what we can spend, we can't swing a series of major repairs on top of a down payment.

3. There's still general economic and health-related uncertainty

To make a second home work with our budget, my husband and I would need to rent it out part of the time. And we're not super keen on doing so during a pandemic. First of all, a lot of people are in a tight spot financially these days, so we're not sure if the demand for our home would be there. If people are cutting back on spending, they may not be looking to take vacations right away.

And while I'm fortunate that the pandemic hasn't impacted my income so far, the economy still isn't great. Until things improve, we're probably better off waiting to make any sort of big financial move. If my income declines, swinging that second home will be very tough.

Also, since the pandemic is still raging, I'm not sure I can handle the logistics of having to sanitize a home between guests. Along these lines, I'm not sure I would even want strangers in my space while the outbreak is still happening, which is yet another reason why now just isn't a good time to buy.

Not buying a second home right now is disappointing given how hard we've worked to save up for one. But the money we have socked away for that purpose isn't being spent elsewhere. Rather, we'll continue to keep it tucked away in savings so that if an opportunity arises to buy later on, we'll be ready to pounce.