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Will Airbnb’s Implosion Trigger A Housing Bust?

Scorpio

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#1
Will Airbnb’s Implosion Trigger A Housing Bust?

by John Rubino ◆ April 29, 2020 Leave a Comment

It seemed like such a good idea at the time. Airbnbs were the next wave in hospitality, taking market share from hotels and motels and backed by a tech network that made running a virtual bed and breakfast fun and easy.
So you borrow a bunch of money, buy a couple of houses, and put them in the system. At first it works. Your properties fill up, your reviews are great, and your projected cash flow is twice what you would receive for a long-term rental. You — along with thousands of others — are thinking “real estate empire.”

Then out of nowhere comes a pandemic(!) and the sharing economy suddenly looks patently absurd. Ride in other people’s cars? No thank you. Sleep in other people’s beds? Gross! Airbnb bookings fall off a cliff, while Airbnb itself reports massive, potentially company-threatening losses.

And just like that, your cash flow turns into cash burn. Big time.
Now what do you do? You already have a house of your own so you can’t move into one of your rentals. You borrowed to buy your properties so you have big monthly payments. And even with the government’s mortgage forbearance program, you’ve got maintenance and taxes to cover, and little income with which to do it.
You kind of have to sell, if not right now pretty soon. But to whom? See US pending home sales sank 20.8% in March. Meanwhile, big price reductions are becoming the norm on Zillow. The stuff you bought near the peak of the cycle may now be worth 20% less – if you’re lucky.
You, in short, are about to learn the definition of “illiquid.”
Another Housing Bust?
Now let’s dial the view back to the housing market as a whole. As recently as February, a lot of regional markets had what realtors defined as shortages of homes for sale, which going forward provides a cushion against falling demand.
But that was with thousands of would-be Donald Trumps snapping up Airbnb-worthy rentals in hot markets. Remove that future demand (because who in their right mind is buying Airbnb rentals today?) and add the new supply coming from people who have no choice but to sell, and the supply/demand calculus might change dramatically. We’ll see.
Here’s what happened to prices in the last housing recession:


Emigrate While You Still Can – To Finca Bayano

https://www.dollarcollapse.com/airbnbs-implosion-housing-bust/
 

Thecrensh

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#2
I suspect that once the economy starts moving again, people will go back to doing what they were doing before the beer virus...and we'll be in a relative normal.
 

dacrunch

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#3
... might slow down the bed-bug pandemic...
 

Usury

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#4
I suspect that once the economy starts moving again, people will go back to doing what they were doing before the beer virus...and we'll be in a relative normal.
Yep...just as soon as the media tells them everything is hunky-dory. And when do you think that will be???
 

Thecrensh

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#6
Yep...just as soon as the media tells them everything is hunky-dory. And when do you think that will be???
I wish I could say that people would just think for themselves but they won't. They're going to sit in fear until they see for themselves and then they'll sit angrily in fear.
 

BackwardsEngineeer

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#7
A friend told me....

That people had been renting popular mid town big SE city, 1 br usually first floor near a secondary entrance for roughly 1800 to 2k / month. Running a generic trying to be non identifiable air posting and netting over 4k / month.... Some people, I was told have many of these, enough to have a full time cleaning person. So the upside 2k cash flow, the downside if discovered, end the lease and loss of downpayment or roughly one months rent.

Was told some people have a these setup throughout the country... to the tune of many 10's of k/month!
 

Hystckndle

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#8
Lotta multi unit AirBB units in Florida
Lotta the ones on high leverage have cash flow problems at the moment.
Duh, right !?
And they have their mortgages to satisfy. Gotta be a lotta stress out there at the moment.
I see fur flying in those multi unit high leverage peeps.
I have stayed out of that.
Affordable housing, that is where it is at.
Always gonna be demand for that as long as there are more peeps.
JMHO
 

specsaregood

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#9
I checked my emails from various saved home searches I have.
This past week I got:
2 new home listings that matched my searches.
12 price drop notifications on homes that matched my searches -- some fairly significant.
 

nickndfl

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#10
Lotta multi unit AirBB units in Florida
Lotta the ones on high leverage have cash flow problems at the moment.
Duh, right !?
And they have their mortgages to satisfy. Gotta be a lotta stress out there at the moment.
I see fur flying in those multi unit high leverage peeps.
I have stayed out of that.
Affordable housing, that is where it is at.
Always gonna be demand for that as long as there are more peeps.
JMHO
I avoid cash flow problems by purchasing 100% in cash.
 

specsaregood

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#11
We are touring a house this weekend. It looks good and checks all our boxes. If its looks as good in person, I'm trying to decide how much I can lowball them on the offer with the market the way it is.
 

BackwardsEngineeer

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#12
We are touring a house this weekend. It looks good and checks all our boxes. If its looks as good in person, I'm trying to decide how much I can lowball them on the offer with the market the way it is.
As far as the market the way it is.... bid on several properties for clients over the last several days, all went within 1% of pre covid price. Our inventory is off 23% compared to same day last year. Rates with the exception of Jumbo (over 510,400) are opening back up heading to 3% on 30yr fixed... Bidding on a 750k property for NE's and 7 showings in the last 3 days....

Market crash might be a myth for now... I'd bid it to win it
 

specsaregood

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#13
As far as the market the way it is.... bid on several properties for clients over the last several days, all went within 1% of pre covid price. Our inventory is off 23% compared to same day last year. Rates with the exception of Jumbo (over 510,400) are opening back up heading to 3% on 30yr fixed... Bidding on a 750k property for NE's and 7 showings in the last 3 days....

Market crash might be a myth for now... I'd bid it to win it
Thanks, this house does seem fairly well priced already.
 

Voodoo

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#14
There are tons of markets with no AirBnB properties. So I don't think its a big enough market to have a country wide effect. Certainly will add to pain in tourist or big business areas.

I think the Real Estate Crash this time is coming like a freight train from commercial Real Estate. That is an expensive market that is in need of a real repricing.
 

Voodoo

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#15
I guess I should add Residential is going to be really hard to tell and depends upon so many factors. IF your property taxes soar in broke areas then kiss that market good-bye. The availability of loans and interest rates and the number of cash buyers available in your market will all play big roles.
 

nickndfl

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#16
AirBnB is not necessarily the overall measure of the market. It's a tiny segment, however if run properly in the right location it can be well more lucrative than long term rentals without the eviction risk of non-payers. It's more work to clean between guests, but you can earn a living in the right business model.
 

specsaregood

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#17
Thanks, this house does seem fairly well priced already.
We wanted to see the house on Monday, but they said no showings until Saturday, so we scheduled one. got notified last night that they accepted an offer somebody else made without touring under the condition of "no more showings" Guess they were so scared of covid that they just wanted to get it over with. oh well, no way was I gonna bid on a house without seeing it in person. I guess houses in our area are still moving fast with low inventories on the market.
 

BackwardsEngineeer

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#19
We wanted to see the house on Monday, but they said no showings until Saturday, so we scheduled one. got notified last night that they accepted an offer somebody else made without touring under the condition of "no more showings" Guess they were so scared of covid that they just wanted to get it over with. oh well, no way was I gonna bid on a house without seeing it in person. I guess houses in our area are still moving fast with low inventories on the market.
Hey specs, we have sold a half dozen places with only a video tour in the last year... two of them closed without ever stepping foot inside. They toured virtually, had both standard and HVAC inspection done during, negotiated repairs based on inspection discovery and closed via POA...

It's a whole new world, the only thing holding us back is our ability and willingness to change!
 

specsaregood

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#20
Hey specs, we have sold a half dozen places with only a video tour in the last year... two of them closed without ever stepping foot inside. They toured virtually, had both standard and HVAC inspection done during, negotiated repairs based on inspection discovery and closed via POA...

It's a whole new world, the only thing holding us back is our ability and willingness to change!
I guess I'm just an analog guy stuck in a digital world then. If I'm looking for something I'm going to live in for the foreseeable future I need to walk around it and get the feel for it. It is a big purchase that I'll be stuck with. Luckily we are in no hurry, we have a paid off house in a good neighborhood, its just too damn small and would have to build UP to expand it and I don't want to do that. Oh well, this is only the 2nd house in the past couple years of watching that we were interested enough to go look at.
 

BackwardsEngineeer

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#21
Understand completely, right or wrong these markets move quickly with lots of eyes watching and waiting for properties to hit the market. Now keep in mind, most of these buyers picture themselves as house flippers but couldn't fetch water pump pliers, romex ripper or a madison hanger if their life depended on it....
 

BackwardsEngineeer

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#22
Hey all, just an update on the real estate market.....

All the time we noodled as to what the outcome of the worldwide shutdown might be, never did I personally consider wide open screaming with its hair on fire. Can't speak about national as those numbers won't be posted for several weeks, but here beautiful chs its smoking hot. Kinda like one of irons girlies, only a redhead with freckles x2! Missed on several in the last day in the 700k and 500k range. Properties on the market 400 to 600 days all went active contingent, inventory going from little to none in a lot of neighborhoods and price points...

Will keep you posted, BE is of to chase Wabbits
 

specsaregood

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#23
Hey all, just an update on the real estate market.....

Will keep you posted, BE is of to chase Wabbits
Thanks, I decided to bite the bullet and going to see a house Saturday, its more than I wanted to spend but its the one DW has been saying is "perfect". It's got a huge freaking lot though, so at least it has that going for it.
 

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#24
I suspect that once the economy starts moving again, people will go back to doing what they were doing before the beer virus...and we'll be in a relative normal.
Disagree. The virus is temporary, but the damage from this money-printing mania, is permanent.

And what it will do, is more of what it did twelve years ago: Transfer more of the hard assets of the nation, that is, stocks and land, into the hands of the recipients of this New Money, and who are blessed with the Too-Big-To-Fail label.

The rest of us will be poorer with our dollars devalued and our freedoms compromised or erased. Some of us forbidden to work. Others not able to find work. Many of us vulnerable to this god-damned Chinese plague - which DOES seem to hit older people disproportionately.

AirBnB is gone - partly because the surplus of wealth which made a tourism industry large, is gone. Just as air travel is going to be reduced by more than half - and Boeing will be a subsidized corporation making nothing, for a generation.

This goes all up and down. Hotels, car-rental companies (Hertz will soon file bankruptcy) and leisure equipment makers, are all gonna crash and most, disappear. Only the connected survive.

And that is no longer capitalism; and "no-longer-capitalism" doesn't bring the prosperity that capitalism did and could.
 

Casey Jones

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#25
As for the real-estate market?

For those with the wherewithal to buy, it's an opportunity.

I have the money, but with the nation crumbling, I don't know where I'll wind up living. Ten years ago I was living in Michigan - but for the gods, I could be strapping on my Mauser, loading my pump 12-gauge, and driving in formation to Lansing, with the rest of those guys.

Right now, Montana has been a haven. What happens when the White Flight wave crests over the Bitterroots from Oregon and California, and washes into town? Where ex-Californians go, their societal ills go. Look at Colorado - it's been devastated by transplants.
 

specsaregood

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#26
Thanks, I decided to bite the bullet and going to see a house Saturday, its more than I wanted to spend but its the one DW has been saying is "perfect". It's got a huge freaking lot though, so at least it has that going for it.
Well guess I just dun bought a house. Upgrading from a .3acre suburban lot to just under 2 acres surburban lot. yay me. Finally gonna get some space and privacy to piss in my front, back, or side yard.
 

BackwardsEngineeer

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#28
Well guess I just dun bought a house. Upgrading from a .3acre suburban lot to just under 2 acres surburban lot. yay me. Finally gonna get some space and privacy to piss in my front, back, or side yard.
Congrats specs... if you're financing be sure to have a broker check around, VA is routinely under 3% currently and lots of 3 to 3.25% conventional.
 

nickndfl

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#29
I was quadruple booked in my units for this holiday weekend and pretty much solid thru June with one double book the first week. You need an island location in a less busy part of FL. then keep all units in the <$150k price range and pay cash. Listen to the cash register sing $$$.
 

specsaregood

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#30
Congrats specs... if you're financing be sure to have a broker check around, VA is routinely under 3% currently and lots of 3 to 3.25% conventional.
Thanks. Yeah we have to finance a lot initially, but got approved for 2.99%. After we move we'll sell this house and refinance and be able to pay off 2/3rds of the new mortgage.
 

BackwardsEngineeer

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#31
My mortgage broker is advising all his new purchase clients to check back next year... claims it will be the year of the refi....

He mumbled that we might get 2% on a 30yr fixed conforming!! That would put 15 yr around 1.4 to 1.6%