Vacation homes were once real estate's hottest play. Now they're a nightmare.

John Kenney is the second real estate agent to take a stab at selling 317 Matterhorn Drive, a rustic, two-bedroom cabin in Gatlinburg, Tennessee. The getaway sits in the foothills of the Smoky Mountains, about a 30-minute drive from Dollywood , in an area that draws millions of tourists each year. At the height of the housing boom, it might have sparked a bidding war . Instead, it's withered on the market for two years.

The home has seen a steady drip of price cuts and relistings since January 2024, when it debuted at $850,000. The owners are now asking for just under $600,000, a decrease of nearly 30%. "NEW PRICE, BIG MOUNTAIN ENERGY!" the listing reads.

"We're just chasing the market at this point," Kenney tells me.

Vacation homes like this one were once chum in the water for hungry Airbnb investors or flush retirees looking for part-time getaways. In 2021, cheap loans and a surge in vacation bookings spurred a buying bonanza, turning staid markets like Gatlinburg and Big Bear Lake, California, into eye-popping examples of the housing scramble. It didn't last long. The short-term rental business has plateaued , forcing more discipline among investors who can no longer feast on record-low borrowing rates and fully booked calendars. Other second-home owners are realizing the places they use a few times a year may not be worth the costs and headaches. All these factors add up to for-sale signs and six-figure price cuts. A report this summer from the research firm Parcl Labs declared America's vacation-home sellers "the most motivated in housing."

It's not all dark clouds for those saying goodbye to their summer cabins and ski chalets. In most of these markets, home values remain well above their 2019 levels, and any longtime owner is likely to turn a healthy profit. But vacation-home owners tend to churn through properties at a faster pace than the average population. Agents in these places say owners generally hold onto their places for four to six years before opting for a change of scenery, which means some sellers who bought at the peak are now staring down steep losses. Even those netting profits may walk away crestfallen as their long-awaited paydays come in lower than expected. The owners of 317 Matterhorn, for instance, bought their place in mid-2020 for $380,000, a bargain by today's standards. Their nest egg will still yield a healthy return, but the owners are still anchored to the gangbuster valuations of 2021 and 2022, Kenney tells me.

"They thought they scored big on being able to add to their retirement," Kenney tells me, "and now it's not as much."