AirBnB, real estate, 0% interest and the economy

[JoeWras]

So this article in the WSJ (The housing slowdown is wreaking havoc on the short term rental market) got me thinking about AirBnB, VRBO and just the general effects of free money. The article is a little different than what I discuss in this post. It addresses some other issues.

I think when it is all over, economists will look at the period of 2010 to 2022 with awe and wonder. Perhaps awe that free money managed to likely stop what would have been a megascale Great Depression II. And wonder that the free money lasted so long, with studies on the interesting timing of a pandemic. It looked like the free money train was over, until the pandemic.

During the pandemic, some really wonky things happened with the return of free money. Tech wages spiraled out of control. Companies were free to give into demands of workers. Why not? Just take a free loan.

But what about the short term rental market? All this money returned at a time when people were close to home, or close to their old home which they were renting. Money was available to upgrade it for the short term market.

All these points are not addressed in the article. Here's my list of what I think are the pernicious effects of this trend:
1) People needing standard repairs were shut out or saw huge inflation as workers were wrapped up in the business of preparing short term rentals or flips
2) Housing units were taken off line during upgrades
3) Short term rentals remove starter homes from new buyers
4) Short term rentals have low occupancy, adding to the shortage crisis
5) Short term rentals are not always best for a neighborhood

I suppose the list could go on. I'm not 100% against these. We've used AirBnB a few times, with great success. But last year we ran into some sketch situations. The beer drinking owner living upstairs didn't give me great confidence. The owner renting out the garden shed disappointed me.

The garden shed thing really hurt. We liked one AirBnB which was a basement apartment. We were there last Christmas, and intended to go in the summer again. It was in a small W. NC town with tight parking. It was fine. But she apparently has become an AirBnB host addict, and decided to turn her garden shed into an extra AirBnB. There's goes the parking. And really, solar showers only for $180 per night?

The allure is strong. They can be useful. But is this the best use for our housing resources?

I dunno, I'm just thinking about how all that money had effects on real estate. It looks like it is still working its way out, and perhaps by next year we'll see if the contracting and repair situation gets better, and if there are more low end homes on the market.

 

[Sunset]

Here is the shed we stayed in at an airbnb, considering the cost was $75/night for 4 nights it was better than paying the hotel $140/night.

The shed was on a farm, so it was fairly private and lots of parking space for my trailer, without fear of theft.

The enclosure on the right of the shed is the outdoor propane powered shower.

I figure the owners are making a killing on that shed !!

 

[ncbill]

The main thing I took away from the WSJ article is that owners are pricing themselves out of the market...hotel rooms now seem cheaper.

Maybe if you're renting an entire house AirBnB makes sense.

 

[calmloki]

Here is the shed we stayed in at an airbnb, considering the cost was $75/night for 4 nights it was better than paying the hotel $140/night.

The shed was on a farm, so it was fairly private and lots of parking space for my trailer, without fear of theft.

The enclosure on the right of the shed is the outdoor propane powered shower.

I figure the owners are making a killing on that shed !!

Nice! Not really what comes to mind when it's called a shed though.

 

[audreyh1]

Not into home sharing, I’d rather rent the whole house, condo or townhome. If not, I’ll take a hotel room any day. These days with suites with full kitchens available hotels are fine, although I don’t tend to use them at the destination. But I do for overnights on a road trip.

I’m not price sensitive when it comes to travel. Comfort, privacy, convenience and location are key.

Anyway - does this article indicate that vacation rental market is softening? Yeah, looks like it, thumbs up for me!

 

[JoeWras]

The article is wishy washy on whether things are softening because they focused on high end anecdotal stories, and followed up with this:

Data from AirDNA, a short-term rental analytics firm, shed some light on what’s causing the drought: As of October 2022, the number of future nights booked—a real-time indicator of the health of the short-term rental industry—was up 15.8% year-over-year.
“For all the people asking if we see any weakness at all in consumer booking behavior, that is saying no,” says Jamie Lane, AirDNA’s vice president of research. “People are booking short-term rentals, and they are booking stronger than ever before.”


However, while the absolute number of bookings has risen, there has also been a sharp rise in supply of available short-term rental listings in the U.S., up 23.3% in October 2022 compared with October 2021. “That’s massive growth,” Mr. Lane says. In the spring, at the peak of the short-term rental supply increase, there were between roughly 80,000 and 88,000 short-term rentals being added per month.

I guess that's my point about posting this. People had time and free money on their hands during the pandemic and went all in on converting to AirBnB. The supply is way up. (Oh boy, one thing that isn't short anymore!)

But AirBnB supply helps cause a shortage in low-end starter home supply for purchase. That's a problem.

To me, this was about the low interest, and the future may be different. But maybe not. Boarding houses were a thing after the Great Depression. Watch "It's a Wonderful Life" and notice that Ma rents out the house because George wasn't there to backstop her. If the economy downturns, short term rental may continue to go up. Not sure about the quality of such rentals, though.

 

[audreyh1]

I think boarding houses were very common near urban areas well before the Great Depression. Owned housing wasn’t nearly as common as today - it was far harder to leverage into ownership.

 

[Gumby]

I think boarding houses were very common near urban areas well before the Great Depression. Owned housing wasn’t nearly as common as today - it was far harder to leverage into ownership.

Here is an interesting article about the rise of the 30 year mortgage and its importance in converting Americans into homeowners. https://www.grarate.com/article/history-30-year-mortgage

 

[Chuckanut]

The main thing I took away from the WSJ article is that owners are pricing themselves out of the market...hotel rooms now seem cheaper.

Maybe if you're renting an entire house AirBnB makes sense.

+1

I rented a two bedroom house earlier this year from AirBnB. . But, after doing some further investigation I realized I could get a two bedroom room at a local hotel, that included hot breakfasts, pool, and three evening meet-and-great events with food, wine and beer. All for the same money. After the bonus points from the hotel chain worth about two free nights in the future, it was a no brainer to cancel the AirBnB and get the room.

 

[ncbill]

I think boarding houses were very common near urban areas well before the Great Depression. Owned housing wasn’t nearly as common as today - it was far harder to leverage into ownership.

Around here boarding houses were common up through the 1960s when they started to be zoned out of existence.

Widowed lady in town whose kids had left the next would rent bedrooms (shared bathrooms) to an eclectic group of residents, e.g. mechanic, judge.

Often those who had lost a spouse with the kids (if any) already gone & also didn't want to rattle around in a large, empty house anymore.

Back when my grandparents were working (1940s to 1970s) here in town in high-status but not high-paying positions (professor/teacher at the local ladies' college) they always rented full-size (4-5 BR/2-3BA) homes that would never be on the rental market today.

 

[NW-Bound]

I have not used Airbnb in the US, only in Europe.

In a 7-week autotrek through Western Europe with another couple, we stayed 90% of the nights at Airbnb rentals. The reasons were: 1) availability of parking space, 2) we stayed for 2 to 4 nights at each place to make the cleaning fee worthwhile, 3) the stay was long enough to do some light food preparation, plus I had a car to go get groceries, 4) it was nicer and less expensive for a 2-bedroom apartment or townhouse compared to 2 hotel rooms.

In more recent European autotreks just by ourselves, we stayed mostly at hotels and ate out. We did stay a few nights in true bed-and-breakfast places, or agriturismos. The owners lived in an adjacent unit or home, and served breakfast. These cost the same as the tourist hotels in town, but were on the outskirts hence had a parking space for the car. Similarly, the hotels we stayed at were all on the outskirts, except for Venice where we had to park out-of-town and rode the bus in.