Man, Did We Dodge a Bullet!
My wife Heejin bought four “2nd homes” during COVID – because why not? 😊
One was in Nevada, two were in AZ, and one was in Texas.
The entire process was comical to watch, as Heejin hired marketing assistants, tech assistants, contractors, and decorators from all over to help get the properties ready.
I rarely saw her too, as she was flying from house to house to house to oversee everything and to manage her army – and we had furniture and supplies EVERYWHERE.
It was pure chaos – and Heejin loved it! Her plan was to rent out the homes via Airbnb when we were not in them.
BUT – then a few things happened that made her think … uh oh…
She was looking at a 5th “2nd home” in Park City when the real estate agent nonchalantly mentioned, “don’t worry, you can easily rent out the home on Airbnb, as everyone is doing so now, and I have a bunch of contractors and contacts you can use to get the property ready and manage it.”
That’s when it became apparent that there would be a glut of short-term rentals. Plus, three of her HOAs declared short-term rentals illegal and imposed 1-month minimum rental periods.
So, just like that, Heejin sold all of the homes, and “operation chaos” ended as quickly as it started – and I was left standing there wondering what just happened.
Heejin dodged two bullets though: (1) she avoided the Airbnb meltdown altogether – as bookings have dropped massively everywhere; and (2) she sold all the homes at huge profits right before rates shot up and the markets we were in softened.
The Impact of Airbnb’s Decline on the Housing Market
I bring this up because Twitter was lit up yesterday with concerns about the collapse of Airbnbs.
Nick Gerli, in particular, tweeted this: ” The Aribnb collapse is real. Revenues are down nearly 50% in cities like Phoenix and Austin. Expect a wave of forced selling…”
David Lin jumped on the bandwagon on YouTube too with this interview: ‘Reckoning’ Arrived As Airbnbs Collapse, Housing In Danger.
The below table was showing up everywhere as well.
Gerli pointed out that Airbnb revenues surged during COVID when everyone was experimenting with remote and renting more often because they were flush with stimulus cash. The worst-hit regions are Eastern Tennessee, Central Texas, the Pacific Northwest, and the Mountain Regions. Gerli further pointed out that there are over 1 million short-term rentals, and if many of those owners are forced to sell, the housing market will get much weaker – given that there are only 570,000 active listings right now.
Analyzing the Impact on Housing Inventory
Enter Logan Mohtashami. Logan Mohtashami is an analyst for HousingWire and the single biggest housing data wonk I have ever seen, and he is also a huge housing bull solely because of the inventory issues. When someone on Twitter responded to Gerli’s tweet above and said “@Logan… wonder why inventory is low and where it has all gone” (implying that short-term renters snapped it all up), Logan responded with this: “Over 144,000,000 housing units in America, Airbnb is less than 1% of that. Reading is a good thing, never a bad thing!” 😊 (Logan is never wanting for sarcasm – which only makes me appreciate him more.)
Here is the tweet, and I HIGHLY recommend following Logan too.
Short-Term Rental Inventory Hitting Housing Market?
TLDR: I dearly HOPE the short-term rental inventory hits the broader housing market because we desperately need it.
AND NO, IT IS NOT GOING TO CRASH A MARKET THAT CONSISTS OF 144 MILLION UNITS.
We might see some softening in some high-end vacation markets like Lake Tahoe, Jackson Hole, and Park City, but everywhere else – I doubt it.
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