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In Housing: ‘Difficult Months’
News sections on real estate websites read like obituaries these days. Not so long ago, they were co
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There are 2 major tranches of housing supply that will likely come on the market in the near term:
1- Airbnb property owners which includes properties purchased solely for short term rentals and people with excess wealth who purchased an additional home that they used a few times a year and then via short term rental paid for the carrying cost. Airbnbs are currently struggling to find consistent rental demand.
2- Private equity owned house rental companies/funds with balance sheets comprised of mostly illiquid real estate holdings and the debt covenants that come with it. As market prices crash and lenders require these companies/funds to mark to market their debt covenants will trigger forced liquidation. Rental demand has peak and is trending down. The next annual cycle will not likely be friendly to rental property owners as this year’s cycle of rents were financed with excess savings from the pandemic.
The idea that tight supply will keep housing prices afloat is the common refrain perpetuated by the real estate broker industry right before a housing bubble bursts. They said the same thing in 2007. With household formation being flat/negative for most of 2022 and no indication of a pivot, supply/demand dynamics for house prices over the next 2 years will not be supportive of current prices.
We are just starting to see the effects of QT and higher Fed Funds Rate as the lag of each will start to show in the economy as Q4 data gets released.
Hopium- all 3 of my condos get rented out when I am not using them. 2022 has been record rental income. 2023 advance bookings looking good. Not sure which geographic markets you are referring to from airbnb but it is as it has always been with real estate – location, location, location.