In the midst of the current slowdown in housing market, more scrutiny is falling on short term rentals.
A booming real estate sector until recently, STRs are now feeling the pinch of higher input costs and higher mortgage rates, right as the wave of “revenge travel” unleashed post-COVID is appearing to abate.
Calls for a correction, potentially even wash-out of these units, many of which were purchased with hot money, FOMO and dreams of big cash flows during the pandemic by retail buyers with little to no experience as property managers.
Such a correction — an “AirBnBust” as many are calling it — could unleash a flood of inventory in many markets with a high concentration of STRs, which would add momentum to any general correction unfolding in the wider national housing market.
How likely is that to occur?
Today we’re fortunate to have housing analyst Amy Nixon back on the program to give us her latest outlook on the situation.
Amy Nixon 0:00
Like I said earlier, this just reiterates the fact I do not see anything bullish for the short term rental market because the bullish scenario, we got 100% in every way possible, with 15 years observed, and a pandemic that had trillions of dollars of stimulus and had a post COVID Travel boom. And all of those things happened before while Airbnb was able to run ahead of regulations. So they literally got like this trifecta of perfect storm for their company for their stock valuation for everything. And they ran with it, and they made a lot of money with it.
But I think now we’re starting to see all these other pieces come into play. And there is a lot of pushback against Airbnb. And I think a lot of it is rooted in frustration by the millennial generation. Millennials make up 60% of the users of Airbnb, so they are 60% of the people who rent them out. And as I said earlier, millennials are getting squeezed by inflation on all fronts, and they are the ones who are going to get hit by the student loan repayments when those come back. So there is zero that I see bullish in terms of anything that would boost travel demand above what we saw after the pandemic.
Adam Taggart 1:31
Welcomed to Wealthion I’m Wealthion founder Adam Taggart, in the midst of the current slowdown in housing, more scrutiny is falling on short term rentals, a booming real estate sector until recently, short term rentals are now feeling the pinch of higher input costs and higher mortgage rates. Right as the wave of revenge travel unleashed post COVID is appearing to abate calls for a correction. potentially even a wash out of these units are rising. And many of these units were purchased with hot money FOMO and dreams of big cash flows during the pandemic by retail buyers with little to no experience as property managers. Such a correction and air b&b bust, as many are calling it could unleash a flood of inventory in many markets with a high concentration of short term rentals, which would add momentum to any general correction unfolding in the wider national housing market. How likely is that to occur? Today, we’re fortunate to have housing analyst Amy Nixon back on the program to give us her latest outlook on the situation. Amy, thanks so much for joining us today.
Amy Nixon 2:38
Glad to be here.
Adam Taggart 2:40
All right, Amy. Well, welcome back to the program, been a bit of a wild ride for you. It was almost a year ago, we had you first on this program. In the wake of your extremely viral tweet about the short term rental markets where you warned about an air b&b Bust. Your career has really taken off since then, it’s been really fun to watch. You and I talk a lot actually, you know, kind of on a weekly basis. Off camera, fun to have one of these conversations on camera, though it’s been a while. I do want to get to the Airbnb bust and everything that’s happening in the short term rental markets. But before we do, just ask you a general question to kick the conversation off. What’s your current assessment of the US housing market?
Amy Nixon 3:25
It’s a mess. I when I was on, I think six months ago, I said the housing markets a mess, you know, it can’t possibly get much worse than this. It actually has to get more broken. And to the point where it you know, mainstream media is actually covering it. There’s just an article in Fortune magazine talking about how broken the market is. And I think you know, we’re in this situation where we had interest rates so low for so long, that there isn’t really a pretty or easy way out of this housing market. So while yes, it’s broken and messy, the solution isn’t necessarily oh, we’re just going to cut interest rates again, because that’s going to sort of fix some of this affordability problems.
It’s this is probably going to be one of these situations where because we still are battling inflation, that it’s going to get ugly and worse before it gets better. That is kind of the only way that you heal something that has gotten this distorted over time.
Adam Taggart 4:29
Or you use the term broken on the day you and I are talking an article just came out from Muhammad Alerion where he basically said he thinks the Fed is has broken the housing market. It basically the Fed has cratered both supply and demand right now, where sellers don’t want to sell right because they they don’t want to basically move into a likely smaller house with a higher mortgage rate than the you know screaming mortgage deals they’re sitting on right now, right? I mean, it’s some huge percentage of homeowners are sitting on mortgages that are like 3% or lower right now. And of course, buyers don’t want to buy at these prices, because prices really haven’t come down that much yet, from all time highs. And mortgage rates are more than double than what they were just a year and a half ago. So I mentioned you know, we had a an era of mortgage rates sub 3%. I think the average 30 year mortgage rate right now is like 7.4, or something like that. I mean, that is a gargantuan difference. We’re like an entirely different universe for homebuyers than we were, like I said just two years ago.
Amy Nixon 5:45
Yeah, we’re pushing to get up against 8% interest rates, which I think a lot of people did not expect us to be here. This, you know, in August of 2023, we interest rates last November breached 7%. And I think a lot of people thought that was peak. And that, you know, by this point in time, there would have been some kind of a Fed pivot or rates was starting to cut back down. That has not happened. And the Fed’s monetary policy tools are very blunt instruments. They can’t reprice assets, all they can do is smashed demand, which is what they’ve done by raising interest rates so quickly. And I think the assumption was that supply would sort of respond to that. But what’s actually happened instead is supply has remained rock out. I think it’s actually the lowest it’s been in the last 20 years. I just see reading something on Twitter this morning. Supply is at record record lows, as well. So we have this housing market that actually looks like it’s functioning in the sense that deals are getting done, homes are being sold. Very low volume, but but it is happening. homebuilders are performing relatively well. But, you know, funding fundamentally underneath that it is not a strong housing market. Because we don’t have enough volume. Mortgage brokers are still laying people off, real estate agents don’t have work. A strong housing market has a lot of transaction volume, that has a lot of homes, changing hands, you know, we’ve got rock bottom listings, we’ve got rock bottom existing home sales, even you know, even the home prices are relatively flat. I think, depending on the region, the country, there are some areas where they’re a little bit down there somewhere, they’re actually up, that does not indicate a healthy housing market. It’s a very unhealthy market.
Adam Taggart 7:43
Alright, so I want to dig into this just a little bit further. So you mentioned you know, some some transactions are moving that homebuyer home builders are pushing inventory. And that’s really where most of the action is right now. Right is home builders are. I saw a title in the media recently, which is that they’re sort of feasting right now. And I gotta see if I can find a chart for this, but I believe I saw a chart that showed that the the median price, can average or median can’t remember which of new homes just dipped under the price for existing homes. And so the reason why home builders are kind of doing so well right now is they’ve got the inventory, and they need to move it obviously, because they built these units, and they need to move them. So what they’re doing is they’re basically cutting deals and providing incentives to enable buyers to get into homes, they’re basically giving like mortgage discounts to buyers where buyers are essentially getting like, you know, kind of like 4% mortgages, from these from these home builders. When all is said and done, and that I think there’s two notable things about that. One is probably the worrisome thing is that with these homebuilders are doing is they’re basically pulling in demand from the future right now. So they’re sort of diminishing even more transactions that, you know, may happen in the future and sort of diminishing the future prospects of the housing market. But also, I think they’re showing what it’s going to take to get this market unfrozen to get transactions moving again, I think they’re giving us a preview of the future, which is that price is going to have to come down and that’s either a function of, well, prices, either mortgage rates are going to have to come down or prices are going to have to come down. Powell is continuing to talk about higher for longer. It does not seem like relief is going to come on the interest rate side anytime soon. And so to move inventory, I think the homebuilders are showing us it’s probably going to take lower prices, do you see it similarly?
Amy Nixon 9:53
Yes, and especially if you look at inventory and what is happening in our housing market right now. Essentially, the Feds interest rate, the 8% rate, nothing’s happening in the market at that 8% rate. The exchanges that are going on right now, you’ve pretty much got, I would say three types of transactions that are happening right now. The first one is sort of like, I would call it boomers trading houses like Pokemon cards, where you’ve got, you know, 65 year old that has a paid off $2 million home, maybe in Boston, and their their kids are going to college in Colorado. So they sell their home for cash, and they go buy a $1 million home, hey, they just skirted around the interest rate problem. It’s they’re impervious to it doesn’t matter to them. So they’re participating in this market. The second type of participant in this market is, like you said, the homebuilders? Well, the home builders are realizing that they’re not getting deals at an 8% interest rate either. So they are buying down the rate. So they’re saying we will close you at a 5% interest rate. And they’re gonna be able to do that for a certain amount of time, while it works with their margins, because they do have a cushion of margins, with prices being so high. But eventually, they’re going to start to run into a wall with their willingness to do that. And their ability to find buyers who can even do it at a 5% rate, because their primary buyer pool is what I would call the first time homebuyer, which a lot of time is like millennial or younger. And that is the group that right now is getting really, really squeezed with inflation across the board on every other thing, this is the group that’s facing the return of student loan payments, there’s only going to be so many high enough income millennials that are going to be able to participate. And I feel like the homeowners are sort of running through right now, that pool, and they’re going to dry up soon, ish, probably sooner than they expect. And then the third type of participant in this housing market is basically just a cash investor. Or a foolish investor that doesn’t have cash, but it’s just a fool. And they don’t, they’re not penciling in the fact that these deals aren’t going to cash flow. Those are basically the participants that we have in this market. And almost none of those people are operating at an 8% interest rate because the market at these prices doesn’t function and a percentage of straight.
Adam Taggart 12:19
All right. Well, let me let me show two charts there, sort of build on what you just said. And, you know, at the end of the day, what we really have here is a massive on affordability problem. And housing prices got to a point where they were so divorced from the fundamentals that that houses are supposed to be priced on, which is basically what local incomes can support, right. And the more affordable the mortgage payments were, by, you know, ZIRP interest rate policies, that allowed housing prices to balloon to multiples of income way higher than really had been seen before. And of course, now, interest rates are not observed right there five plus percent mortgage rates, like I said, approaching seven and a half percent right now and the 30 year fixed. And so we have a ton of people who are just priced out of this market. And I want to show you visually how badly this is an AMI, you’ll know this chart, because you share this the other day on your Twitter account. This is the income required to qualify to be able to buy the average home. And you can see here, it has more than doubled since the pandemic, right, we went from about 47,000 to about 104,000 right now. And that’s in the span of what you know, three and a half years. So I mean, to me, I look at this and this is one of those charts where I just wonder like, what’s it going to take for the pitchforks and torches to come? Right? Because so many people are just you know, left behind it’s like, you know, you were you were trying to catch that brass ring. And as your hand was getting close to it, all of a sudden, it just zooms miles ahead of you. Again, this this move and over three years, as you can see from this chart here, just incredibly historically apparent, and gotta be just incredibly demoralizing for most aspiring homebuyers out there. I want you to react to that. But real quick, I just want to put one other visual up here that’s kind of related. You talked about boomers buying homes and and the millennials that can kind of afford to even though it’s a dwindling population. Right now apparently. There’s this new term called the NEPO housing market, where it says 40% of homebuyers under 30 Get family money to cover their downpayment. So this is one showing that you know, to support the current housing prices, there basically is massive subsidy coming from the older Jenner rationed to the younger generation. Right? So to your point about it not being a healthy market, first time homebuyers, a huge percentage of them can’t get into a new home without having substantial Family Health. And of course, talking about affordability in sort of, in the context, the greater context of wealth inequality. You know, this is just sort of widening the the opportunity gap, the prosperity gap, the wealth gap in this country, where, you know, those 40 to 60%, who don’t have family money to help them out, they can’t get into a home, they can’t start building home equity. Right. So, you know, again, I guess, to your earlier point, these are all just signs of a broken housing market. But but not necessarily just Oh, prices aren’t great, it’s really showing that there’s a massive diminishment of opportunity for a huge population of Americans now that we’ve had this, you know, relatively recent and relatively extreme departure from historic norms in this market, and it’s just leaving a massive chunk of the population behind.
Amy Nixon 16:10
Yeah, and, you know, unfortunately, a lot of it is is the younger generations, and we’re starting to see a lot of pushback and amongst the younger generations, because they’re sort of starting to realize, these are what my options are. And it’s not the same situation that my parents had I know, interest rates were, you know, 15%, and 1980. But houses didn’t cost 5.6 times the median income in it. So this is a totally different macro environment that we are dealing with these high interest rates. And this is a high interest rate environment that’s coming on the heels of literally 15 plus years of zero rates, where asset prices just went parabolic. And those asset prices have not corrected for the current rates at this point in time. So what you’re left with is, credit is too expensive for the assets for anybody that doesn’t already own one to get a foot into this market. And that is sort of leading us in this position. And we’re seeing this a lot now, where I think a lot of millennials and Gen Z are a little bit resentful about what our options are. Because it’s looking increasingly like, there’s a couple different ways you can do this. Number one is you’re just lucky, like you said, and you’ve got the parents a lottery, and you get some help with your downpayment, or you get married, and you get enough wedding money that you can pull together and buy an unaffordable home. Option two is you rent and rents are really high as well, where I record high rents. So the whole rent and just, you know, cut back on Starbucks, it’s not going to cut it, it’s not going to work anymore, rent is too high for you to out, save, and it sort of beat the system by just living really frugally on a median income. That’s that’s not going to work. So the last option that we’re left with is and this is what we’re seeing, and this is what we’ve seen over the last two years. And this kind of parlays back to the Airbnb thing is we’ve got this entire cohort of Gen Z, millennials on Instagram on tick tock, and they’re saying, hey, you know what, you can’t afford a home, then you’ve just got to do whatever you can, to get on this property letter, borrow money, put down, you know, three to 5%, borrow at 8%, whatever private lender might even be giving you 10% For some of these, like private DSCR loans, get or get a cash flowing property, almost like a side gate, they don’t even look at it as a real estate investment. Like maybe you’re gonna lose money on the asset doesn’t matter. This is a side gig, this is cash flow for you to get your family ahead in the market. And that’s kind of like what we’ve seen emerge in the last couple of years with the younger generation. And it’s, it’s kind of icky, because, you know, it’s crazy that the only way some people feel that they can have a chance to buy a home for their own family is that they have to be come some sort of like, mini Empire landlord person, like a lot of people don’t really want to do that. So our options are not great. Our options are not great for young people.
Adam Taggart 19:32
So you know, I talk a lot on this channel about wealth inequality. And I just had a really deep conversation yesterday with Stephanie Pomeroy building on one that I I started a few weeks ago with Neil Howe and then Peter Atwater, who are both researchers that track demographics, social trends, confidence and the common theme among Fellas conversations is that there’s this growing sense of sort of shared hopelessness in different parts of society and certainly, in the younger generation. So you just mentioned there Gen Z and millennials, there really is this increasing sense of like, the American Dream is just this big, unattainable lie that we’re kind of being sold. And certainly, when they go, you know, get to college, and they get in their 20s, and start getting married and thinking about starting a family and then go to, you know, start household formation and look at buying a home, I mean, immediately, so many of them, were just like, Are you kidding me, there’s no way I’m going to be able to afford the average home, you know, if he’s current prices, and right now truly, it is the most unaffordable time to buy a house, I think ever on record, given the record high housing prices that we’ve had, plus these now extremely high mortgage rates. And so I certainly don’t blame them in the discussion I had with Stephanie, which will have aired on this channel, Amy, by the time this interview is live. You know, we really go into the fact that like maybe the bigger breaking point to watch out for here, we keep talking about the Fed breaking something and worrying that something breaks in the financial system or the banking system, and might actually be more like a social breaking point, where, you know, there’s just enough fire amongst enough of a cohort in society where folks just say, Look, we’re just not going to take it anymore. And I don’t know what that’s going to have that’s going to manifest. But I think housing could definitely be a flashpoint on it, because it really tends to be the things that are the at the base of Maslow’s hierarchy of needs, that are really when people push back because they really feel they’ve got nothing else to lose, right? They’re down there at the bottom and they can’t afford shelter. They can’t afford food for their families, whatever, that’s when people get really desperate. So, alright, look, I don’t want to get too dark here. But um, we have this massive unaffordability issue. Right now, as you said, kind of the boomers are, you know, they’re they’re owning a good chunk of the housing inventory. And they’re owning a good chunk of not just for living in themselves, but also they own a lot of, you know, investment property that they rent out. There’s a chart of yours will show in a second. That shows in the short term rental market, the biggest growth in the cohort that’s owning short term rentals is in the oldest age cohorts. But in addition to boomers, we also have a bunch of institutional ownership. In the real estate market. We’ve railed about this a bit on this channel before I just want to show one other. One other visual here. See here, your tax dollars are helping Wall Street big money institutions could control a stunning 40% of us rental homes by 2030. Analysts say this has gotten to the point where there’s been actually some some progress made in in the halls of power, where in DC, there are some congressmen who have now proposed the stop Wall Street landlords act. So it’s interesting to your point about you’re finally getting to the point where there’s some pushback on stuff. I haven’t read this act in full, I don’t necessarily know, I can’t make a specific comment for or against it. I can say to the spirit of the title, I’m 100% for it, right? I just don’t think that there’s a lot of good coming from substantial institutional ownership of our single family home stock. And that’s what’s going on here, right? We’ve got big private firms like Blackstone, and others coming in and buying up, you know, 1000s and 1000s of homes across the country, oftentimes highly concentrated in certain areas. And it’s, it’s just not a fair fight, right? These guys can, they’ve got way deeper pockets, they’ve got access to borrow at much lower rates than the average person does. They’ve got economies of scale across their portfolio. And so there’s just no way that an average retail buyer can compete with these big institutional buyers when they’re coming into a market and hoovering up homes with all cash offers that are at higher rates than, you know, listing price. So if you could just comment for a moment to on kind of the the long term concerns of having institutions come into our single family home market.
Amy Nixon 24:32
Yeah, you know, it’s interesting that that article specified by 2030, because what I’ve actually seen it pretty much since last November, which is when the Fed hiked rates, and when mortgage rates first went over 7%. There’s actually been a pullback in institutional homebuyer. Now that may, it may not show in some of the data because a lot of the data points we’re seeing are oh, you know, X percentage of homes being sold. In 2023, are institutional and that percentage might look kind of high. Because no homes are being sold in 2023, like the volume pool is so tiny, that you know the percentage going to investors is higher. And that doesn’t necessarily specify what it says investors, it doesn’t necessarily specify institutional versus like a mom and pop type investor. And the reality is, the volume of investment buying was higher in 2021 2020. than it is now. So a lot of investors have actually pulled back, they’re kind of sidelined with their little war chest of capital. And so I look at that, and I’m like, what are they waiting for? Um, you know, there are still investors buying right now, obviously, but are you know, are these the Tick Tock investors? Are these the unsophisticated investors by now, at really ridiculously high interest rates in valuations? You know, are these people actually underwriting these deals to see whether or not they cashflow whether or not they’re going to work in a non ZURB environment? I don’t know. And in the meantime, we’ve got some of these bigger investor players in the background that he started pulling back from buying back in November and B, actually started liquidating some of their assets as well. And some of that’s due to fund redemptions. So they had to, but some of it is strategic liquidation. And I think, you know, is this entire thing because, inevitably, it always seems to me that it’s going to end up the same way, you know, history doesn’t repeat, but it rhymes. We saw this in 2008, the regular people piled into the bubble in the last stages, and Wall Street landlords swept in when the prices started to drop in 2008 2009 2010. And they bought everything up. And it’s looking like we’re setting up for something exactly like that again. But you know, it’s going to require some outside forces you possibly a credit event or a recession or something that’s going to have to shake loose some of this inventory from these late entrant investors who many of which are probably losing money at this point, or not cash flowing the property, whether or not they’re sitting on equity, they might be riding just on this little cushion of equity. But time at high rates will shake a lot of these people out. And Powell just came out of Jackson Hole and said he has no intention of Lori rates anytime soon. So you know, I think that a lot of these more institutional bigger players like a Blackstone or you know, some of these like invitation homes, open door all these people, they might just be waiting
Adam Taggart 27:55
to pounce. Well, so okay, this, this was where I want to go real quick, I just want to I just want to continue to just beat the horse for a second on. So let’s say you’re correct about, they’re waiting on their war chest. And at some point, you know, better values come along, and housing because prices come down, interest rates come down, maybe both happened simultaneously, right, all of a sudden homes can be purchased for much better values. Those guys deploy their war chests. Let’s let’s let’s take the title, that article at face value for a second, let’s say by 2030 40% of our single family home stock is owned by institutions. I mean, can you spin that in any way as a positive for society? Or is that like something we should all be really concerned about? And whether it’s the act I mentioned, or we want another better one? I mean, should we is just citizens be sort of demanding, hey, you know what, there are certain things that we just want to keep corporations out of? Yes, they could own all of our homes, but we don’t want them to, because that just creates a power dynamic and a permanent diminishment of opportunity for the individual that we just don’t want to have in this country.
Amy Nixon 29:12
Yeah, I mean, I think that’s a situation where we’re going to see a populist pushback, because the average person in this country, particularly the average young person, in this country, just wants to be able to buy a home for their family. They don’t want to own 10 investment properties. They don’t want a side hustle as a landlord.
Adam Taggart 29:31
And they don’t want to be forced to rent until they’re 90 either, and they don’t
Amy Nixon 29:33
want to be forced to rent from the people that are doing that stuff. So, you know, I think at some point, there’s going to be, yeah, a societal tipping point. There’s already there’s political pushback. And I don’t know if this is necessarily something that can be solved politically, you know, the obvious things that people push for rent controls or, you know, more regulations around homeownership, some of which could To be effective, especially in terms of tax there are there’s tax law that we can enact that would disincentivize people from hoarding non owner occupied homes. I think that’s probably the first more mild direction that it would things would go, and it would be a political or regulation type thing. But if that doesn’t work, then I think at some point, eventually, you know, you get the pitchforks.
Adam Taggart 30:24
All right. All right. Well, I’ll get off this. And we’ll just note to say that we’ll keep our eye on on the blowback meter in terms of you know, how resistance this potentially starts building from here. Okay, but But getting back to the point you made, and this is, this is the ark that I’m using to get to the whole short term rental, part of the discussion. One of the vulnerabilities of having so much stock of the housing stock that’s owned by investors, particularly the big institutional investors, is, you know, they say that’s where the smart money is. And perhaps on average, maybe it is, I mean, these are more sophisticated investors. That being said, I’ve heard from many people in the in the real estate space, hey, don’t, don’t be guilty of overestimating the intelligence of a lot of these guys, a lot of these, these firms actually make some pretty bad decisions. And I think we might be seeing one right now with Zillow, you know, which famously had to exit, it was out there buying a lot of inventory, it actually got in trouble had to dump it, fortunately, was able to sell it to another institution. But right now they’re back in the media, because I think they’re offering something like 1% down mortgages in the market right now to help, you know, basically stimulate transactions right now. I feel highly confident that we’re going to be reading headlines, you know, in 12 months or less, saying what a terrible business decision that was Brazil. But But my point is, is when you have investors, let’s take the institutional side first, if they get in trouble. And remember, a lot of these institutional investors, they invest in other things. In many cases, commercial real estate, which is in wait and even way worse situation right now than than the residential market. But if they get in trouble, there’s a chance that they could be pressured to have to dump their holdings, right, where it begins to become not a matter of, oh, I want to, you know, sell for a good price, it becomes a matter of survival, where, hey, we just need to sell stuff that’s either it’s not cash flowing the way that we thought we get to stop the hemorrhaging, or, Hey, you know, we’re just having to make capital calls, and we just have to sell assets just to make, right, you mentioned that that may already be going on a little bit. So you know, you could have them dumping a lot of inventory on a relative in a relatively short period of time, if they get distressed, not saying that they definitely are, but saying that that’s a risk. And of course, the more that we go into recession, the more that the lag effects that we talked about in this channel, start hitting the economy in earnest, I think the risk of that goes up on the kind of mom and pop individual investor side, the issue there too, right is that they don’t live in these homes. Right. So they hold on to them more loosely. And so, you know, times begin to get tight, you know, maybe those homes aren’t cash flowing the way that they were, or, you know, they’re just their portfolio takes a hit, right? We maybe we have another 2022 Next year, and they’re down another 25 30% in their portfolios, and they’re like, oh, my gosh, you know, I can’t hold on to this second home or third home anymore, or I need the cash, right, so I gotta sell it. They’re much more likely to sell and distressed than someone who’s actually living inside a residence. So my point is, is we have these, this investor cohort, that if mortgage rates continue to stay high, and if the economy continues to stumble going forward, we could suddenly see a fair amount of inventory coming on from this institutional side of things. We’d love to get your thought about that, because I then want to connect it to the potential increase in inventory we could see coming from the short term rental market too.
Amy Nixon 34:02
Yeah, I mean, I think it’s going to be as particularly a regional issue. This was a pandemic housing market, we had a lot of migration to certain parts of the country during the pandemic, and we had a lot of investment money migrating to certain parts of the country as well. And I know, you know, off the top of my head, I recall in 2021, that I think Dallas County and Tarrant County, which is neighboring Dallas County, had over 40% of the homes sold in those years were sold to investors. So all of these investors, you know, we don’t know who they are. We don’t know if they’re foreign. We don’t know if they’re big players, small players. But we do know that a lot of them probably have been used to operating in a zero interest rate environment and probably didn’t foresee that the Fed was going to hike rates at the fastest based in history, and hold them for as long as they are. So what the current housing market looks like right now is very disingenuous, because it to me, it’s kind of like a person who gets in a car accident. And they are like, get out of the car, I’m fine. You know, they go home, everybody’s like, Oh, look, they made it, they’re fine. They’re okay. But there’s internal bleeding. And internally is one of those injuries, where it’s, you don’t really notice it until it’s really a problem. And, you know, then you go back in and you discover you’re bleeding all this time, I’ve been, you know, and I didn’t know, that’s kind of what it feels like is happening right now, with a lot of these investment properties, some of these investors are starting to bleed, they’re starting to hemorrhage cash every month. And they’re pushing a little bit by the equity that they have. But at a certain point, push is going to come to shove with a lot of these properties. And I think a lot of them are still hanging in there thinking they’re gonna get a pivot. And at what point do they realize there’s no pivot coming, and if it’s a bunch of them in the same region, and some of them start to slowly, almost like who’s going to be that person that’s going to break the prisoner’s dilemma. And right now, they’re all kind of like, hey, if we all don’t sell, then this really low sales volume, and low inventory on the market can prop everybody up, we can all be winners. At some point, somebody’s going to crack somebody that’s bleeding too much, it’s going to crack. And as that starts to adjust calms down, you know, just as quickly, as we saw, we saw in 2020 21, inventory was tight than two on the way up, all it took was one to two houses being bid 20%, over listing your neighborhood to reset the comps in that neighborhood. That is why we saw regions have home prices jumped 5% a month in some neighborhoods in parts of Dallas, because everybody
Adam Taggart 37:02
loved that who owned everybody
Amy Nixon 37:05
on the way up. It’s fun on the way up. But you know, I think we may see similar on the way down. And what eventually happens then is you get that rush for the exits when there’s just enough of it, that people start to see their equity slipping away. Because right now, they’re pretty much if they’re not cash flowing, they’re hanging on with their equity.
Adam Taggart 37:25
All right. So I appreciate you saying that, because that validates something I’ve said often on this channel, when interviewing folks about real estate market is your point about the prisoner’s dilemma, there is a first mover advantage to the first guy to bolt from the herd. Right? He can say, Look, you know what, I’m getting nervous, I can reduce my price by 5%. And probably sell and I’m going to capture, you know, 95% of my keep that 95% of my equity here, right? And I’m not one of the I won’t be one of the suckers chasing the price down, if this thing really starts waterfowling, right. So everybody’s trying to hold together and solidarity but everyone’s kind of looking at each other, you know, psi wise, because they know that you know, but whoever bolts first is if someone bolts, you know, they’re gonna get the best deal. But I don’t want to be the first one to boat just yet. Because I want to see if we can keep this dream of solidarity together. Right? It’ll be interesting to see. And you know, there’s a lot of boomers, who most of their retirement is their home equity. Right? And so there’s some threshold beyond which they they’re going to start sweating too much and saying, Oh, my God, if prices come down, if they drop below x, well, then I gotta get my house in the market quick because I can’t afford to lose much more equity than that. At least that’s the calculation they’re doing in their head. All right, moving on to the star of the show here, the short term rental market. Again, as I mentioned in the intro, you kind of get put on the map by your declarative prediction of an Airbnb, Airbnb bust. I want to get an update on where we are in that but but first Amy Airbnbs inventory for Airbnb, investors piling into them, people becoming hosts and whatever, that all exploded during the pandemic. Can you explain why?
Amy Nixon 39:13
There? I mean, I think the biggest explanation for it is that we had a trillion dollars pumped into our economy. So all of a sudden there was all of this money available. And when money’s just out there at six yield that’s gonna run to assets and because interest rates were also the lowest they’ve been in, ever, it made sense to start buying properties. And it also made sense to anticipate that we were going to have some sort of a travel revenge summer. Eventually after these COVID lockdowns ended, were
Adam Taggart 39:51
inserted or updated, but even that did manifest that COVID revenge, but during the pandemic, people could not travel internationally. Right? But you could rent an Airbnb somewhere, right? So I mean, we kind of had this captive travel audience in the states that otherwise might have left the country to go to Europe or Bali or whatever, but they couldn’t. So they had to travel inside the US so so Airbnb hosts had kind of this captive audience for a while true is that is that indeed what happened?
Amy Nixon 40:24
Yeah, that’s part of it, as well. And also, you know, now that you mentioned that I thought of another aspect of it, too, is work from home exploded. And so suddenly, maybe you got people who wanted to rent an Airbnb for some office work, you know, or to do. You know, there’s people running Airbnbs to stage Instagram stuff, because we also had an explosion of gig work and an explosion of different types of work from home jobs. Airbnbs then sort of had multiple functions, you know, we could people were using them for a week long state, you know, people were moving all over the country as well during that time. So hey, let’s go stay in an Airbnb in this neighborhood for a week and see if we like and maybe we’ll buy a home here. There was all kinds of new utilizations for Airbnb s at that time as well. But I think, fundamentally, it was kind of it I don’t even know to be honest with you. I don’t know how many people would that even bought rental properties, initially intended for them to be Airbnbs. Because when you see on a data data point, like showing, oh, in 2022, we had this increase of Airbnb is listed on Airbnb. We don’t know if that person purchased that home in 2022, for it to be an Airbnb, or if they purchased that home in 2018. And they decided to make it an Airbnb in 2022 and then put it on the Airbnb listing. And that kind of response, I would say, came from the fact that suddenly Airbnb was a goldmine. When the post pandemic boom started, and the travel started, everybody started talking about how much money they were making on Airbnb. And so anybody that own property was probably like, gosh, you know, why am I working so hard to get a tenant to rent this property for $2,500 a month when I can rent this thing out for $200 a night, and I don’t even have to fill it all month long. And if I do fill it all month long, I’m gonna cashflow way more money than if I just rent it to a regular family.
Adam Taggart 42:27
Okay, so that kind of Bonanza, right is largely a function of demand. Right? So you know, what people are willing to pay to book a night and how many nights a month you can book it. And your cost of capital? Right? What’s going on in both of those? Now, we know that mortgage rates are higher. Maybe that doesn’t really matter that much to you, if you your Airbnb is a place you bought with a 30 year, fixed mortgage back in 2019. But I don’t know, are people buying those with fixed mortgages? Or are they buying them with adjustable rate mortgages, right, which tend to be cheap on the way in but can really bite if interest rates go up the way that they have? And then secondly, what’s happening in demand? You know, we did have the revenge travel season, is that abating or what
Amy Nixon 43:17
is starting to abate. Back when I first came on your show in October of last year, I sort of was starting to see the writing on the wall in terms of the post COVID travel, especially domestic was starting to fizzle out, we’ve seen this summer, there’s been a little bit of a boom in overseas travel because of inflation, the way that it’s worked out, the dollar is a lot stronger. So we can up a lot of people are discovering they can get a better vacation more for their money, if they go overseas. And in terms of domestic, it is still high on a historic basis. But it’s starting to return back down to those pre pandemic levels, which isn’t a bad amount of demand. It’s not we’re not in a recession that is, you know, destroying all travel demand. But the problem is, is that the supply was driven up so high to meet, like extraordinary demand level that we’re already starting to recede away from that extraordinary demand level. So there are a lot of properties that are sort of like fringe properties that aren’t great. They’re not getting booked. It’s a now it’s become very competitive, especially in certain regions that are very saturated, you need to have a good property, you need to have a good price, and you need to advertise it well. And if you are not doing those things, I think there’s a lot of properties that are just sitting vacant, and the owners are kind of in this weird point where they’re like, Well, I can do turn it into a long term rental or you know, how long can I hold on to it and just cling to this little maybe 10% equity I gained in the last year. But I do think that, in my opinion It the post COVID Travel Demand probably peaked in, like late in 2022. It’s still high this year and 2023, but it’s starting to pull back. And I don’t see anything bullish for it going forward. Because Millennials make up 60% of the users of Airbnb. So they are 60% of the people who rent them out. And as I said earlier, millennials are getting squeezed by inflation on all fronts. And they are the ones who are going to get hit by the student loan repayments when those come back. So there is zero that I see bullish in terms of anything that would boost travel demand above what we saw after the pandemic.
Adam Taggart 45:46
All right. So you some very important points there. One, you said that, you you see zero bullish indicators for demand going forward, right, meaning that demand is likely to be lower going forward than it is right now. To that supply has gone through the roof, right. So it started getting a lot more competitive, and that there are now an increasing number of properties, maybe still small in terms of absolute number, but an increasing percentage of properties that are not penciling out anymore, right for their owners. So you said that some of them are thinking about, Wow, maybe I’ll make it turn it into a long term rental. So this goes back to the inventory. point I was making earlier, right, where rents are very high, as you said earlier, but they are starting to come down. Right, they’re just beginning to come down. A lot of analysts think that they’ve they’re going to, they potentially have a fair ways to fall now given how high they they zoomed up during the whole COVID issue. And, and so, you know, if there are more Airbnb units that are now getting converted in the long term rentals, because they’re not penciling out as short term rentals. Well, that’s going to add increased inventory to the rental market. And that therefore in theory should be depressing rent even further, right into it. In theory, housing prices should be a function of what they could that unit can be rented for. So that’s another downward drag, just sort of on the general housing market. Right. The other potential inventory is the person says, you know, I don’t want to be a long term landlord, I’m kind of done with being a landlord. I just want to sell this thing. You know, there’s a risk there that the overextended Airbnb owners could potentially start flooding just the single family home market with units right of like, Hey, I don’t, I’ll just put it on. Let somebody else buy it. Right. So I’m curious if you see zero reasons to be bullish about demand for for Airbnb is, do you think that almost sort of ipso facto, by that logic, you’re gonna see, Airbnb is starting to contribute to either the long term rental, or just the general? You know, housing, retail housing sale, inventory issues?
Amy Nixon 48:07
I do, I think we’re going to see both. And quite frankly, I expected us to see it a little bit sooner. You know, I, at this point in time, now that I went on your channel in October of last year, I think and talked about this Airbnbs concept. I’ve had pushback from people saying, where’s the bus? You know, we’re at record low inventory, I’m not seeing these properties come on the market, like what Where did you go wrong? You know, I think if there’s anywhere where I erred, it was under estimating the final FOMO stages of how bubbles operate psychologically, because what I actually have seen over the last nine months, and I’ve gotten messages from people that have been short term rental operators for you know, 1520 years that confirm this, and I’ve seen data showing this, there are a lot of experienced short term rental operators who began selling or unloading some of their properties starting late last year. What I didn’t account for at the time, was the fact that in the very late stages of a bubble is sort of the fools Russian so they’re not having any problem unloading these Airbnbs to new investors who don’t understand macro who don’t understand gosh, you know, I’m buying this really expensive valued property at an 8% 10% If it’s private loan interest rate and this is not going to cash flow you know, Guy A that selling the property is laughing all the way to the bank taking this you know, away, but this new 25 year old that watched on Tik Tok Hey, I’m gonna get rich quick. By selling device running, managing an Airbnb, you know, these are the late entrants and these are the people that are We’re gonna blow up and get her her first because it’s going to always be kind of like a lastin first out scenario when you have these kind of like bubble run ups. So I guess, you know, I, I didn’t anticipate that this year was kind of gonna be the blow off top phase, which is kind of what it’s looking like it is, which just adds a little bit of time to the entire thesis of what is going to happen. But I do think that it’s still on track to have the same ultimate destination, which is going to be that there are a lot of overleveraged people that got into this market too late. It’s oversaturated. The properties don’t cashflow. And I’m still now this is August of 2023. Like I live just a week ago, there was a couple of boomers on Dave Ramsey show calling asking him if they should buy an air b&b. Like we’re still at that stage of the bubble. Like it’s not. It’s not popped yet. But it’s getting to those like Final dredges of like oh, man, you know, everybody is is that last FOMO going in.
Adam Taggart 51:06
Alright, me. So it sounds like you’re saying this thing is sort of running on fumes. We’re now it’s being powered now by the greatest pools, and there are only a limited number of them. And once they’re gone, sentiment shifts, and then we’ll reverse. It also sounds like you’re saying that the sort of the stool that’s supporting the Airbnb market right now is getting increasingly rickety. But if I heard you correctly, it sounds like one of the legs that’s keeping that rickety stool still upright, you think is gonna get kicked out pretty soon as student loans go into repayment, one because it’s going to really impact demand, because you said Millennials are the majority of the folks that are actually booking these rentals. And presumably, if you’re a tech talker, or your wife, you’re someone who gets influenced by Tiktok, to stretch yourself and get into one of these rentals, you’re probably sitting on some student debt as well yourself. And that’s going to go into repayment, crimping your cash flow, too. So is it fair to say is it fairly safe to say that you think that that IMEC may start picking up speed? You know, once we get through October, and those loans start going into repayment?
Amy Nixon 52:15
Yes, I think we’ll start to see a pickup speed. I think that going into this fall and into next winter, we’re going to see bookings continue to decrease in most parts of the country with Airbnbs. And that’s just assuming, you know, student loan payments really kick in and inflation kind of remains on the trajectory that it’s been on, that’s not accounting for you have a credit event or a recession, those two things happen, then this is going to be an entirely different, more crash like trajectory. But even without any of those things, the market is so tight right now that it’s not going to take a lot of pushing. And it’s not going to take a lot of inventory to start to have those crafts show through and some of these regions, especially that are really heavily saturated prices are going to start to come down.
Adam Taggart 53:15
Alright, and me on that. You sent over a couple of charts. So again, we haven’t gotten into repayment, yeah, REITs, that leg of the stool hasn’t been kicked out yet. But you live in Dallas, right. And that’s a pretty highly saturated market. And if I’m reading the chart that you sent over correctly, or the table here for Dallas County, Texas, it says average occupancy for the next 30 days is only at 40%. Right now. So are we already beginning to see some real concerning signs that that demand is weakening in some of these heavily saturated markets?
Amy Nixon 53:54
Yes, we are. And I do want to clarify, I think with my I think my phoenix example, or my Scottsdale example, showed the Yeah, 39%. But then you have to show the chart that shows the historic, there you go. So this is I think the most telling chart because you see the seasonality component accounted for here because what if you just show that 39% number to somebody? They’re gonna say, Well, you know, who wants to go to Dallas in August? It’s 105 degrees. Okay, I get it. I live here. I agree. But it same thing with Phoenix. This chart shows you that the peak occupancy which was like Spring Break ish time, you know, January to March was, it looks like about 75% And that was in 2022 and 2023. During that same month period where occupancy is high. It was lower, it was down more like 67%. So you’re seeing the peak occupancies drop, lower and you’re seeing those lower occupancies like during the offseason, those are also dropping lower. So they’re seeing lower highs and lower lows, lower highs and lower lows. So it’s showing you that the trend is that occupancy is dropping across the board across all seasons. And still, even with this, the average occupancy is 56%. So there’s a lot of properties that are not occupied, that are not cash flowing. And again, I think it’s just a matter of people are hanging on to them, because they have equity in them. So they’re, it’s not something you know, maybe they’re bleeding out a little bit of cash every month, but they’re not in a position where they are going to lose the property is there sort of like in that weird, maybe we just wait longer and see if the pen the Fed pivots kind of environment. And again, that’s just time is going to correct for that. And unfortunately for them, like I said earlier, Paul’s just reiterated that higher for longer, I think higher for longer is going to do a lot of damage for a lot of these people that are just kind of hanging in there with poor occupancy.
Adam Taggart 56:07
Alright, so it sort of sounds like you’re saying is a wily coyote moment here, where, you know, folks are just kind of hoping that things stay the same. But the longer that house keeps it higher for longer the effect of gravity, the likelihood that gravity is going to kick in with interest rates is starting mortgage rates as high as they are, is really going to start pulling the whole market downward. I’m just putting up here to your your chart here of of active listings in Dallas. And you can see how they’ve, I mean, from September 2021 to now so what that’s not even quite two years, inventories increased by what here already percent?
Amy Nixon 56:48
Yeah, it’s it’s a big increase. But I also you know, what, what you see at the you see it flatlining at the top and actually starting to dip and that to me is indicative of market oversaturation. That’s where you see and I also Dalston password regulations this year, banning Airbnb. So that’s going to be a big factor. But you actually see a similar looking chart in Scottsdale, and they did not pass the same type of regulation. So I think this chart clearly shows you that markets have saturated. I mean, there’s not been we’ve kind of peaked, there was a run up, like I said, you know, last year, there were people buying Airbnbs, like crazy, this was like the hot new thing. And now we’ve kind of in visually shows you that we’ve sort of trickled out to kind of the greater fool that’s keeping the market or that’s keeping the inventory flat. Now you’ve got maybe some of the season sellers are selling to our season two owners are selling to some of these FOMO younger new investors, and it’s holding inventory where it’s at, but it’s not, we’re not adding new ones at this point.
Adam Taggart 57:56
Okay, so there’s two other potential headwinds that are potentially going to be blowing harder in the face of the short term rental market. One is you just alluded to this, but there’s an increasing degree of pushback against short term rentals in a lot of municipalities where folks are just getting tired of dealing with partiers you know, in other wise residential neighborhoods. Some of it’s an affordability issue than the they were talking article just came out that 10s of 1000s of Airbnbs are going to be outlawed in New York City starting next week. So it seems to be something that is kind of spreading nationally. Right? You mentioned it’s happening there in Dallas, it’s happening in Manhattan, certainly it’s happening out where I am in places in California. How what are the impacts of that gonna be?
Amy Nixon 58:54
Like I said earlier, this just reiterates the fact I do not see anything bullish for the short term rental market because the bullish scenario, we got 100% in every way possible, with a 15 years observed, and a pandemic that had trillions of dollars of stimulus and had a post COVID Travel boom. And all of those things happened before while Airbnb was able to run ahead of regulations. So they literally got like this trifecta of perfect storm for their company for their stock valuation for everything. And they ran with it and they made a lot of money with it. But I think now we’re starting to see all these other pieces come into play and there is a lot of pushback against Airbnb and I think a lot of it is rooted in frustration by the millennial generation. To me, Airbnb has kind of become like this cultural divide. against of like millennial socio economic woes, honestly, it The company was founded Brian Chesky actually is an old millennial like me. And she, you know, the company started out as a very millennial friendly concept. It was sharing economy. It was, hey, I got this spare second bedroom in my apartment. It’s not being used. If you want to come to San Francisco, why stay at a $200 night hotel, we go sleep on my couch for 90 bucks in the spare bedroom, and I’ll throw in a craft beer. And like your Interview with Neil Howe, he was talking about some of this. Millennials are very community oriented generation. We love the idea of community. We love the idea of utilizing resources that aren’t being utilized like spare rooms. And we loved the idea of affordability. So when Airbnb started, it was like, this utopia for millennials. And what happened to it over time, it got sort of polluted by by SERP and by greed. And it became something that I don’t think it really was intended to be at the outset. Which isn’t to say that I think that Airbnb as a company is a victim necessarily here. But I mean, you know that, yeah, they did profit off of it. But they also got themselves into a lot of PR messes. So which I think I’m director. But I mean, they have gotten a lot of pushback, and just like the it’s Hi, Warner guy, and he created these cute little plush Beanie Babies for kids to cuddle. Did he ever envision that these things are going to be hoarded and sold for 1000s of dollars on eBay? No, that wasn’t his intention. And I don’t think it was Airbnbs intention to sort of take over the entire United States with these mini hotel empires. So I’m not coming out here and saying that Airbnb is this like, evil overlord company. I think, if you’re going to point fingers, or say that there’s a problem here, the problem is, is the greed that was born in this ZURB environment, which is the environment that Airbnb sort of came of age in. And Airbnb is just like emblematic of that. And Millennials look at it as another thing that got ruined by greed observed, it was something that was supposed to be cool, and it started off cool and fun, and cheap and affordable. And it turned into something that we can’t afford anymore. First of all, a lot of Airbnbs in the US aren’t affordable anymore. And second of all, it turned into something polarizing, for our generation, because you have now sort of a cohort of our own generation, that’s saying, hey, the only way you’re gonna get ahead and be able to buy property is if you do this, too, you know, you need to become an Airbnb landlord, and you need to, to do this. And then there’s the rest of the people out there who are like, I don’t want to do that, like, I don’t want to participate in this, like that’s gonna, you know, I’m not going to do this. It’s going to make all these problems worse for future societies. But then those people are a little bit resentful inside because they have to rent from the other people and they want their Instagram vacation.
Adam Taggart 1:03:20
All right, Amy. Well, look. So wrapping this up, then. So what do you see for Airbnb in the short term rental market? As you look out, you know, with your your future goggles on? I know, it seems that it’s taken longer to hit its zenith than you thought and for the correction to occur. Is it all downhill from here? How big of a correction do you see when this all plays out? What do you think is the most likely trajectory from here for this market?
Amy Nixon 1:03:54
I think there’s there’s two trajectories you have to consider. The first one is if we continue on the path that we’ve been on with disinflation, and rates being held high, student loan repayments will kick back in consumers will be squeezed harder, we will see a drop off in bikinis, we will see sort of a controlled unwind of a lot of these over leveraged recent Airbnb buyers in the last three years, they’ll start slowly, whether they’re converting to long term rentals, or whether they’re just selling the properties and getting rid of them. We’ll see sort of a slow unwind. I think it’s certain regions of the country that could lead to some pretty serious price corrections in those particular regions, but I don’t think it’s necessarily going to trigger like a nationwide crash await style. That’s sort of like a more the Airbnb problem is contained trajectory. And then trajectory B is if as rates stay higher For longer, we have any type of credit event, we have more bank failures. We have some external event that, you know, some black swan that nobody’s thought of or talked about that.
Adam Taggart 1:05:12
Or how about just a garden variety recession, or a
Amy Nixon 1:05:15
recession, which at this point feels like a black swan event, because we haven’t been allowed to have one for 20 years. But if we actually had a recession, then the job losses, combined with the hit to discretionary spending that’s going to absolutely kill travel. And remember, Airbnb has not existed in a recession yet. I’m not counting for months in 2020, as a recession, that was not long enough. And it was met with such a dramatic stimulus response that that did not have like the impact that you know, a one to two year recession would have on travel demand. So Airbnb has yet to prove itself in a recessionary economy. And if we got a recession, then I think it’s possible that we will see mass dumping of a lot of these properties on the market. And that would help to reprice some of these assets, or at least very least turn into long term rentals and help reprice rents, which, honestly, at this point in time, anything is better than many hotels, like we need homes for families, whether they rent them or buy them. Either way, it’s going to improve our housing situation.
Adam Taggart 1:06:27
Well, Amy, sorry, I totally agree with that. And let me just share this. Yes. All right. So this is a chart that you sent over. But it basically says that 62% of us listings for Airbnb have been added since 2020. So this just shows how ferociously the Airbnb listing pool has grown in just the past three and a half years. Right. So to your point, Airbnb hasn’t really been tested by a bad recession, or even garden variety recession, for the most part, you know, ignoring the very short, sharp one we had in 2020, before the stimulus piled in. Point being is, is there’s a lot of people that are kind of Johnny come lately is to this market. And, you know, if they got in, because of all the froth that you were talking about earlier, we’re out, we’re making money hand over fist, because people have stimulus checks, they gotta pay, and they can’t leave the country and they want to go, you know, since they don’t want to be stuck in their apartment, you know, during work from home, they want to, they want to work from home out in Sedona, or whatever, you know, fine, they had, they had the perfect conditions, as you said, the perfect storm of perfect conditions, as you said, as a bloom starts coming off of that rose, there’s a good chance that a good percent of that 62% are going to say, hey, wait a minute, this isn’t the environment I got in for right. This is like the opposite of what I got it for. And rather than put money in my pocket every month, this thing’s sitting unused. And it’s it’s draining money from my pocket. And again, we don’t know what percent of those 62% bought with adjustable rate mortgages. But I think even if we make a conservative assumption, you know, there’s probably a bunch of them that are really getting injured. Now with mortgage rates this high, right, as those Adjustable Rate Mortgages start to adjust higher. So the point being is is there’s just a lot of potential for that wave of listings, flooding the real estate market, from the short term rental market. If indeed some of those shoes you mentioned do drop.
Amy Nixon 1:08:36
Yeah, and one thing that you know, too, I want to point out with that chart, the best data that I have so far says is at least a quarter of them are adjustable rate.
Adam Taggart 1:08:45
Oh, God, really a quarter? That’s fine.
Amy Nixon 1:08:49
Um, and the other thing I want to point out that was actually just tweeted me about this earlier today. homes that were purchased after 2020, we have to look at differently, there was a massive volume, like buying boom after 2020. And all of these people that bought these investment properties after 2020. I don’t think that they were, first of all, I don’t think they were accounting for rates being hyped so high because we hadn’t seen it in so long. And a lot of these young, they weren’t imagining it back then imagining it and then and so that’s that’s one aspect of it. But the second big factor that we’re starting to see in just the entire housing market, not just short term rentals, but it’s hammering short term rentals to is the effects of inflation. When people took out these loans, how close to the edge did they go with what they could afford to borrow how close to the edge they push with that cash flow that they needed to make the property penciled in and make sense of the deal? Because if they’re really close up to the edge, well guess what now I’ve got a bunch of people in Florida not paying their homeowners insurance because they can’t afford it. We’ve got record heatwave Get across the country. It’s been over 100 and Dallas for about like 40 days straight, believe me, I’ve been running in it. I know. And these people are paying utilities, they’re paying electric bills on that Heatwave, their utility bills have gone up 20 30% Since 2020, when maybe when they penciled in, this is what my electric is going to cost me, this is what my insurance is going to cost me, oh, property taxes, those have jumped up as well, every year those and especially like places like Dallas, those go up. So even just regular people who made up somewhat financially logical investment and 2020, are getting hammered by inflation that they didn’t anticipate. And all of those expenses continue to climb, while their revenue is flatlining, or even going down. So I think everybody that bought a home after 2020, unless they paid cash, they’re a little bit in a precarious situation. And I think we’re gonna see a lot of those properties are gonna be the ones that come back on the market. It’s a weird situation where we’ve got a lot of these boomers sitting on paid off homes, and no, they’re not going to go into foreclosure. This is not gonna be like 2008 where all the boomers lose their homes. But we have this massive investor pool that has been vying for the last three or four years that I just don’t think they had anticipated or accounted for the rates and the inflation and all of these other carrying costs.
Adam Taggart 1:11:32
All right, well, very well said, Amy, I’m gonna have to start wrapping it up here. timewise, unfortunately, super interesting discussion, open invitation to come back on the channel anytime in the future, to update us as additional developments start happening in this market that make the trajectory even clearer from here. But certainly, you know, there’s a lot of sunrise of this way, there’s a lot of volatility and a lot of vulnerability in the story. And the fact that you see zero reasons to be bullish going forward from here, you know, isn’t a good sign. All right. Well, we that Amy, for people who have really enjoyed this conversation, and would like to follow you and your work, where should they go?
Amy Nixon 1:12:14
I’m just on Twitter or X, I guess now it’s called x. Yeah, so I’m Texas writer, DFW. You can find me that way. I think I have a couple of postures. But I’m the main account. So okay,
Adam Taggart 1:12:28
well, when we edit this, Amy will put the handle to the correct X account up on the screen so folks know where to go to follow you. And, folks, if you follow me on Twitter, you’ll see that Amy and I interact pretty frequently throughout most days on Twitter. So I highly recommend that you follow her accounts. All right, just in wrapping up to Amy is going to be one of the participants at our upcoming Wealthion conference on Saturday, October 21. To find out more about that conference, the amazing lineup of speakers we have for it, just go to wealthion.com/conference, you can find all the details there. And you can lock in the early bird price discount, which is about 30% off full price. And if you’re an alum of one of our previous conferences, you can save an additional 15%. On top of that, make sure you check your email inbox for email from me where I give you the code you should use for that. Alright folks, and you know, as Amy talked about, there’s there’s a lot of potential shoes to drop in the housing market in general, but certainly in the short term rental market going forward. If you are a homeowner, if you’re a real estate investor, if you’re an Airbnb host, and you’re trying to figure out, you know what decisions you might want to make in advance of the type of outlook that Amy shared with us here. I highly recommend that you solicit the expertise of a professional financial advisor to help you think through those considerations. You’ve got a good one, you can do that for your great stick with them. But if you don’t feel free to schedule a free consultation with one of the financial advisors that Wealthion endorses, by going to wealthion.com these consultations are totally free. They there’s no commitment to work with these guys. It’s just a free public service. They offer to help as many people as possible position prudently today in advance of some of the turbulence that the future might bring much of which Amy outlined for us here in this discussion. And if you’d like to see me come back on his channel, as soon as she has additional news to share in the Air B and bust story. Please vote your support for that by hitting the like button and then clicking on the red subscribe button below. As well as that little bell icon right next to it. Amy it’s always a pleasure talking to you any last bits of parting advice for folks as we head on off here.
Amy Nixon 1:14:48
Um, I would just say if you’re a young person, just be careful about things that you’re seeing on tick tock or on YouTube. Exercise caution and terms of is this a good time to buy an investment property right now? It isn’t. It’s not. So just make sure if you’re thinking about doing that, really understand what you’re doing, run the numbers and be smart about it.
Adam Taggart 1:15:17
All right, me, like I said, open invitation to come back on whenever you want. Everybody else. Thanks so much for watching.