The Next Big RE Bust

Ah, the beauty of being wrong. Who doesn’t love taking a huge gamble on something you knew would go right, only for it to go completely sideways?

Just ask any Airbnb host in a major metro area how they’re feeling right now. You’ll probably get a mixture of panic, several f-bombs, and a big ol’ dash of existential dread.

If you’re not living under a rock, you’ve probably caught wind of the short term rental (STR) industry being in quite the pickle. The implications this could have as it rolls downhill are nothing short of the biggest barrel of pickles we’ve seen in awhile. Maybe since 2008.

Binds like a looming STR bust require investors who went all-in to saddle up and ride out the changes. On the great hero’s journey that is life, we’re often called to fight a monster or two, and sometimes that monster is a rogue investment we thought was bulletproof.

Don’t forget, what doesn’t kill you makes you stronger. And potentially a little more attractive.

Memes of the day

AirbnBUST

Just how bad are things? Our buddy JG_Nuke from Nobody Special Finance makes it all clear as day in a recent chat with Travis from Real Estate Mindset.

Now, 2023 housing prices sustained because there was a fairly equal amount of supply and demand. The only logical way to maintain the status quo would be to keep up with a historically low inventory.

If supply goes up, you can bet the ranch there will be an impact. Enter stage left: the STR crisis.

Major metro areas like NYC, Dallas, and Las Vegas have all begun to ban Airbnb and VRBO rentals. NYC also led the way on additional bans and restrictions (surprise, surprise) in the form of impossible licensing and zoning requirements.

In addition to a mountain of red tape, rules like having STR owners register with the city, live in the building, only having two guests at a time pretty much put the nail in the coffin. Airbnb did try to sue NYC to postpone these rules, but the case was dismissed.

Some call what’s happening a way to keep neighborhoods peaceful. Others call it just another big-brother government overreach.

However you want to slice it, it’s only a matter of time before the foot soldiers start enforcing things, which could lead to an unfathomable amount of homes hitting the market with lightning speed.

Monster Math

Ready for some mind-blowing math? According to Zillow (which isn’t 100% accurate, but close enough), in NYC, there’s roughly 22,000 properties for sale. To get a better sense of how bad things could get, you have to look at how many STRs there are in the same area.

Out of 43,000 active STRs in the Big Apple, 61% of them are single family homes. That shakes out to around 26,000. Now, imagine those 26,000 dead Airbnbs and VRBOs get listed on the MLS. That’s…a lot of supply. Crunch the numbers for yourself over at AirDNA.com.

If all of those homes go up for sale, it would make up 3.2% of the entire U.S. inventory. Most other big cities would get astronomical inventory increases, too. Major yikes.

Into the Cave

Sounds like the perfect storm, doesn’t it? A housing supply tsunami with impacts for just about everyone. Institutional buyers are probably chomping at the bit, seeing how this could help them continue their smash and grab of our nation’s residential areas.

If you’re in the market for a new home, you might cheer for low prices…as long as you can beat out those cash offers.

If you’re a small bank, have fun with all the Airbnb owners defaulting on their mortgages, many of which they couldn’t afford in the first place. If you’re thinking, “why don’t they just convert to a long term rental instead”, in most cases they’ll make far less than they did off Aunt Bettie and Uncle Joe’s vacation.

So, what would a hero do when faced with this monster of a black swan event in our future’s path? What would you do if the life-changing investment that flung you to new heights is about to bring you down faster than an ex-boyfriend in a Taylor Swift song?

He’d peer into the inmost cave and face it head on. For heroes, entering the cave and facing those monsters takes brutal honesty. You might have to test yourself in ways you never thought imaginable and think on your feet for new solutions.

Instead of panicking about the crisis in your midst, look to the next step on the hero’s journey to see you through: find a guide to help you beat those monsters.

The Guide on Your Side

If you’re in the market for a new home, you might cheer for low prices…as long as you can beat out those cash offers.

We know the journey isn’t all sunshine and rainbows. If it were, there’d be no point. Coming out on the other side of a tough battle with new lessons learned is what it’s all about.

Being alive means taking chances and following your instincts, even when they sometimes lead you astray. That’s why having a guide on your side makes all the difference.

One of the ways we guide investors is through our white label Back Room Service.

When you partner with Dare Capital, you get:

Greater income (a lot more)
Owning assets instead of commissions
Zero investment down
No personal liability
Fifty-fifty split on risks and profits

When you’re ready to embark on your next adventure, just say the word.

Give us a call to start the next leg of your journey.

Until next time,