Smokies "hiney showing" thread

Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

We have officially entered the "Hiney Showing" phase in the Smokies. That is, homes being offered for less than what was paid for them very recently. It's all a part of the boom/bust real estate cycle in resort areas. The inevitable end to "But this time it's different" chants.

I'll be posting these as I see them.

Here's the first. No further bookings in April or May. It was purchased for $2.4 million in 2022. Asking $2.25 million today, and offering $20K in "buyer credits".

3385 Birds Creek Rd, Sevierville, TN 37876 | MLS #1256702 | Zillow

[email protected]806-672-7102

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Quote from @Dan H.:

Real estate investing used to be "buy in the right location, rent it long-term, and hold onto it forever." Everyone started pushing STR, MTR, accelerated growth with more borrowed money, etc. I believe everything is going to correct and we'll see losses in more than just STR.

Buy property and do everything you can to hold onto it forever. It will eventually cashflow. It will eventually appreciate. It will eventually make you look like a genius.

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
2y
Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

What do days on market look like right now? Great graphs btw.
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Mike Anderson
Rental Property Investor · Clayton, GA · Member since 2020 · 185 posts · 152 votes
2y
Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
1 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.
0 Reply
Kingsley Thomas
Member since 2021 · 33 posts · 29 votes
2y
Absolutely love this thread. Getting some popcorn. Anyone have any thoughts on the Joshua Tree STR market? Are those properties overpriced as well?
0 Reply
Collin HaysBusiness Member
OP
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
Quote from @Mike Anderson:

Quote from @Steve K.:
Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.

Since I own five Great Clips franchises, more haircuts would always be welcome. 🤣
[email protected]806-672-7102
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Collin Hays:

Quote from @Mike Anderson:

Quote from @Steve K.:
Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.

Since I own five Great Clips franchises, more haircuts would always be welcome.

bottom line just like all business those that are over leveraged and not properly capitalized will suffer in a cash flow crunch. I get the 100% leverage it can do wonders for you it you catch the market on the correct swings buy low sell high.. but if you get caught needing to hold this can be quite stressful to lever up your personal residence to use that money for equity on a property that drops in value U end up in a mess financially speaking
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2y
Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

The inventory for residential shows virtually no properties sold which means inventory is growing virtually by the number of new listings. On the positive, the sellers are not yet desperate. On the negative, the listed price is far too high to obtain equilibrium.
Indicators are prices are going to fall significantly.
The Averys use to claim the smokies were recession proof without having owned through a recession. This is not really even a recession. Having owned drive to STRs at the Great Recession I knew otherwise.
I will say the smokies are not alone in lower occupancy. My long time beach STR is having its worst occupancy since the Great Recession (not including when the state shutdown STRs during COVID). My furnished MTR is renting at a lower rate than I can get for the unit as an unfurnished LTR. My STRs and MTRs are cash flow negative. Note in 2019 my beach STRs approached 100% occupancy. My STR occupancy was below 60% last year. My MTR had a high occupancy but the rate was so abysmal that it was still negative cash flow. Unlike the smokies, my property values are continuing to rise which takes away much of the unpleasantness of the negative cash flow (value up close to $300k last year).
Those who are over extended and will be forced to sell in the smokies may lose a lot of money. The lesson is not about trying to time the market better; timing the market is difficult. The lesson should be that leverage can increase return, but over leverage can be risky and costly.
Good luck

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y
Quote from @Dan H.:

Real estate investing used to be "buy in the right location, rent it long-term, and hold onto it forever." Everyone started pushing STR, MTR, accelerated growth with more borrowed money, etc. I believe everything is going to correct and we'll see losses in more than just STR.

Buy property and do everything you can to hold onto it forever. It will eventually cashflow. It will eventually appreciate. It will eventually make you look like a genius.
The DIY Landlord Book4.7248 Reviews
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Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
Quote from @John Carbone:

also the pool cabin pumpers during Covid did exceptionally well when kids were doing school from home and there was a lot of demand year round for pools in off peak times…now those pool cabins sit empty because kids are in school and people aren’t willing to pay a premium to stay so the place sits unoccupied. All of this was very predictable, but unfortunately only a few here were able to see this 2-4 years ago. A memorable reply I recall  from a pumper here back then was “I wont let you rain on my parade” … well now it’s a tsunami coming inland and it doesn’t care about your feelings.

Well I for one bought pool cabins for times like this and I am so glad I did. Are things down - yes. Did I have to lower ADR - yes. But my 2 bedroom pool cabins are doing way better than my 3 bedroom cabin on the mountain ridge with absolutely amazing views.

The pool is the top amenity - not the view that gets preached so much. So in times like this I am so glad I have pool cabins. But because I bought right and didn’t fall into the frenzy and pay through the roof for my pool cabins I’m still doing well and making money. Not 2021-2022 money but more like 2019 money.

So buying the pool cabin was not a bad thing at all. In fact it’s probably one of the smartest things I did. But buying them at 2021-2023 prices would have been very tough.

3 Reply
John Carbone
Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
2y
Quote from @Ken Boone:

Quote from @John Carbone:

also the pool cabin pumpers during Covid did exceptionally well when kids were doing school from home and there was a lot of demand year round for pools in off peak times…now those pool cabins sit empty because kids are in school and people aren’t willing to pay a premium to stay so the place sits unoccupied. All of this was very predictable, but unfortunately only a few here were able to see this 2-4 years ago. A memorable reply I recall  from a pumper here back then was “I wont let you rain on my parade” … well now it’s a tsunami coming inland and it doesn’t care about your feelings.

Well I for one bought pool cabins for times like this and I am so glad I did. Are things down - yes. Did I have to lower ADR - yes. But my 2 bedroom pool cabins are doing way better than my 3 bedroom cabin on the mountain ridge with absolutely amazing views.

The pool is the top amenity - not the view that gets preached so much. So in times like this I am so glad I have pool cabins. But because I bought right and didn’t fall into the frenzy and pay through the roof for my pool cabins I’m still doing well and making money. Not 2021-2022 money but more like 2019 money.

So buying the pool cabin was not a bad thing at all. In fact it’s probably one of the smartest things I did. But buying them at 2021-2023 prices would have been very tough.

I think this makes sense and my comment was more geared towards the mansion cabins with pools that need to rent for $500+ a night when there is no demand for that 7 months of the year (except during Covid). They need to drop probably down to $250 but they can’t/wont do that and the cleaning fees and cost to operate the pools prevents them from doing so. There are always exceptions to the rule, but most people on here bought during Covid and a lot of pool cabins (big ones) have been empty most of the season except during spring break.

2 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Nathan Gesner:

Quote from @Dan H.:

Real estate investing used to be "buy in the right location, rent it long-term, and hold onto it forever." Everyone started pushing STR, MTR, accelerated growth with more borrowed money, etc. I believe everything is going to correct and we'll see losses in more than just STR.

Buy property and do everything you can to hold onto it forever. It will eventually cashflow. It will eventually appreciate. It will eventually make you look like a genius.

That's the crux of it even now though.

That intermediate view of STR/MTR came out during what mid 2022 for about the last year or so? Trailing 1-2 yr numbers on STR made people evaluate investment properties on these metrics. I head my hand in the sand then so I don't know.

I think STRs correct hard, but I think that's the buying opportunity. I just don't think those chickens are going to come home to roost anytime soon. I am still thinking closer to end of 2025 but really Q1 2026 earliest. Most sellers are listening to their agents who have a very inflated view and/or think when these rates come down we'll list and it'll explode. I argue the latter is wrong-- it'll actually correct harsher.
0 Reply
Mike Anderson
Rental Property Investor · Clayton, GA · Member since 2020 · 185 posts · 152 votes
2y
Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
0 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
What you're probably seeing in North Florida where you were is the market shifting from sellers to buyers, and inventory just hasn't had time to pile up yet. There's typically a lag from when demand drops off as it takes time for supply to build up and then pricing finally adjusts. A lot of sellers haven't yet gotten the memo that rates have doubled and it's not 2022 anymore when you could list a turd property at premium pricing and still get multiple offers. Plus we have the "lock-in" effect going on now where people that would normally move are locked in to super low interest rates. They don't want to give that up and when they start looking at the numbers, they realize that even to make a lateral move would mean doubling their monthly payment. So people are staying put rather than moving. Sellers aren't that motivated to drop their price as their monthly expenses are low and they still have a lot of equity thanks to the run up over the past few years. Neither buyers nor sellers are that motivated. This was the case throughout 2023 which saw the lowest transaction volume nationwide in about 30 years. Most transactions were due to divorce or death last year. People who needed to move, not people who wanted to. So it was neither a buyer or a sellers market really because not many people were doing either. Good time to be an investor with cash in my opinion, but you have to be the type of person who is greedy when others are fearful. Inventory is still pretty low in most markets so if interest rates come back down it will probably continue being a strong sellers market in most places, barring a real recession.
In my market it's a mixed bag currently: we still have very low inventory in the entry-level price bands (under $1M) where we are still seeing multiple offers above-ask on any reasonably-priced listing that's in decent condition (I saw one go over-ask by $500k last week with 18 offers!), while the more expensive listings (over $3M) are seeing longer days on market, bigger price drops, and inventory starting to pile up (still under 6 months in that category however, which is actually really low for that price point as it typically takes longer to sell higher-end properties, so we're just getting back to normal finally there). 13 months of inventory is full-on buyer's market territory however, that's what I was referring to above in the smokeys convo (a market that I know nothing about hence my question about inventory there, which drives other metrics like list price to sale price ratio, average DOM's, etc.). Months of inventory is always relevant because basically it gives you a general idea whether a buyer or seller has the upper hand in negotiations. More inventory= better chance of a buyer getting a blood-sucking lowball offer accepted, being able to include contingencies in the offer, negotiating inspection items, asking for seller concessions like a 3-2-1 rate buy-down etc. Less inventory= better chance the seller will tell you to pound sand if you try any of the above. They will either have better offers coming in or they're already under contract with 2 strong backup offers, and they have no motivation to negotiate anything. But it's more about the trend and watching what inventory was recently compared to what it is now, to get an idea of where the market is going...
4 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
What you're probably seeing in North Florida where you were is the market shifting from sellers to buyers, and inventory just hasn't had time to pile up yet. There's typically a lag from when demand drops off as it takes time for supply to build up and then pricing finally adjusts. A lot of sellers haven't yet gotten the memo that rates have doubled and it's not 2022 anymore when you could list a turd property at premium pricing and still get multiple offers. Plus we have the "lock-in" effect going on now where people that would normally move are locked in to super low interest rates. They don't want to give that up and when they start looking at the numbers, they realize that even to make a lateral move would mean doubling their monthly payment. So people are staying put rather than moving. Sellers aren't that motivated to drop their price as their monthly expenses are low and they still have a lot of equity thanks to the run up over the past few years. Neither buyers nor sellers are that motivated. This was the case throughout 2023 which saw the lowest transaction volume nationwide in about 30 years. Most transactions were due to divorce or death last year. People who needed to move, not people who wanted to. So it was neither a buyer or a sellers market really because not many people were doing either. Good time to be an investor with cash in my opinion, but you have to be the type of person who is greedy when others are fearful. Inventory is still pretty low in most markets so if interest rates come back down it will probably continue being a strong sellers market in most places, barring a real recession.
In my market it's a mixed bag currently: we still have very low inventory in the entry-level price bands (under $1M) where we are still seeing multiple offers above-ask on any reasonably-priced listing that's in decent condition (I saw one go over-ask by $500k last week with 18 offers!), while the more expensive listings (over $3M) are seeing longer days on market, bigger price drops, and inventory starting to pile up (still under 6 months in that category however, which is actually really low for that price point as it typically takes longer to sell higher-end properties, so we're just getting back to normal finally there). 13 months of inventory is full-on buyer's market territory however, that's what I was referring to above in the smokeys convo (a market that I know nothing about hence my question about inventory there, which drives other metrics like list price to sale price ratio, average DOM's, etc.). Months of inventory is always relevant because basically it gives you a general idea whether a buyer or seller has the upper hand in negotiations. More inventory= better chance of a buyer getting a blood-sucking lowball offer accepted, being able to include contingencies in the offer, negotiating inspection items, asking for seller concessions like a 3-2-1 rate buy-down etc. Less inventory= better chance the seller will tell you to pound sand if you try any of the above. They will either have better offers coming in or they're already under contract with 2 strong backup offers, and they have no motivation to negotiate anything. But it's more about the trend and watching what inventory was recently compared to what it is now, to get an idea of where the market is going...

I recall in 2009 Miami condo market had a 11 YEAR supply :)
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
Quote from @Jay Hinrichs:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
What you're probably seeing in North Florida where you were is the market shifting from sellers to buyers, and inventory just hasn't had time to pile up yet. There's typically a lag from when demand drops off as it takes time for supply to build up and then pricing finally adjusts. A lot of sellers haven't yet gotten the memo that rates have doubled and it's not 2022 anymore when you could list a turd property at premium pricing and still get multiple offers. Plus we have the "lock-in" effect going on now where people that would normally move are locked in to super low interest rates. They don't want to give that up and when they start looking at the numbers, they realize that even to make a lateral move would mean doubling their monthly payment. So people are staying put rather than moving. Sellers aren't that motivated to drop their price as their monthly expenses are low and they still have a lot of equity thanks to the run up over the past few years. Neither buyers nor sellers are that motivated. This was the case throughout 2023 which saw the lowest transaction volume nationwide in about 30 years. Most transactions were due to divorce or death last year. People who needed to move, not people who wanted to. So it was neither a buyer or a sellers market really because not many people were doing either. Good time to be an investor with cash in my opinion, but you have to be the type of person who is greedy when others are fearful. Inventory is still pretty low in most markets so if interest rates come back down it will probably continue being a strong sellers market in most places, barring a real recession.
In my market it's a mixed bag currently: we still have very low inventory in the entry-level price bands (under $1M) where we are still seeing multiple offers above-ask on any reasonably-priced listing that's in decent condition (I saw one go over-ask by $500k last week with 18 offers!), while the more expensive listings (over $3M) are seeing longer days on market, bigger price drops, and inventory starting to pile up (still under 6 months in that category however, which is actually really low for that price point as it typically takes longer to sell higher-end properties, so we're just getting back to normal finally there). 13 months of inventory is full-on buyer's market territory however, that's what I was referring to above in the smokeys convo (a market that I know nothing about hence my question about inventory there, which drives other metrics like list price to sale price ratio, average DOM's, etc.). Months of inventory is always relevant because basically it gives you a general idea whether a buyer or seller has the upper hand in negotiations. More inventory= better chance of a buyer getting a blood-sucking lowball offer accepted, being able to include contingencies in the offer, negotiating inspection items, asking for seller concessions like a 3-2-1 rate buy-down etc. Less inventory= better chance the seller will tell you to pound sand if you try any of the above. They will either have better offers coming in or they're already under contract with 2 strong backup offers, and they have no motivation to negotiate anything. But it's more about the trend and watching what inventory was recently compared to what it is now, to get an idea of where the market is going...

I recall in 2009 Miami condo market had a 11 YEAR supply :)

I think that qualifies as a strong buyer's market then, lol.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
These realtors are schmucks. Constantly pushing that narrative in other markets. I've looked at N Florida and C Florida hear the same ****, yet when I put offers out there back in Oct/Nov, I'm getting inquiries here the last week or so if I'm still interested. From 6 months ago? Thought there was a lineup from what you told me.

I think primo Miami still stands strong, but S Florida will get it's reckoning for a myriad of reasons here shortly. Not just from a supply angle.
0 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
2y
Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
What you're probably seeing in North Florida where you were is the market shifting from sellers to buyers, and inventory just hasn't had time to pile up yet. There's typically a lag from when demand drops off as it takes time for supply to build up and then pricing finally adjusts. A lot of sellers haven't yet gotten the memo that rates have doubled and it's not 2022 anymore when you could list a turd property at premium pricing and still get multiple offers. Plus we have the "lock-in" effect going on now where people that would normally move are locked in to super low interest rates. They don't want to give that up and when they start looking at the numbers, they realize that even to make a lateral move would mean doubling their monthly payment. So people are staying put rather than moving. Sellers aren't that motivated to drop their price as their monthly expenses are low and they still have a lot of equity thanks to the run up over the past few years. Neither buyers nor sellers are that motivated. This was the case throughout 2023 which saw the lowest transaction volume nationwide in about 30 years. Most transactions were due to divorce or death last year. People who needed to move, not people who wanted to. So it was neither a buyer or a sellers market really because not many people were doing either. Good time to be an investor with cash in my opinion, but you have to be the type of person who is greedy when others are fearful. Inventory is still pretty low in most markets so if interest rates come back down it will probably continue being a strong sellers market in most places, barring a real recession.
In my market it's a mixed bag currently: we still have very low inventory in the entry-level price bands (under $1M) where we are still seeing multiple offers above-ask on any reasonably-priced listing that's in decent condition (I saw one go over-ask by $500k last week with 18 offers!), while the more expensive listings (over $3M) are seeing longer days on market, bigger price drops, and inventory starting to pile up (still under 6 months in that category however, which is actually really low for that price point as it typically takes longer to sell higher-end properties, so we're just getting back to normal finally there). 13 months of inventory is full-on buyer's market territory however, that's what I was referring to above in the smokeys convo (a market that I know nothing about hence my question about inventory there, which drives other metrics like list price to sale price ratio, average DOM's, etc.). Months of inventory is always relevant because basically it gives you a general idea whether a buyer or seller has the upper hand in negotiations. More inventory= better chance of a buyer getting a blood-sucking lowball offer accepted, being able to include contingencies in the offer, negotiating inspection items, asking for seller concessions like a 3-2-1 rate buy-down etc. Less inventory= better chance the seller will tell you to pound sand if you try any of the above. They will either have better offers coming in or they're already under contract with 2 strong backup offers, and they have no motivation to negotiate anything. But it's more about the trend and watching what inventory was recently compared to what it is now, to get an idea of where the market is going...

Some time back on one of the threads from maybe a year or so ago, maybe more I can't remember, there was a big "what effect does the fed raising rates have" thread. My contention was that the entire housing market will just end up shrinking. There will still be equilibrium, just that the entire size of housing relative to GDP will be much smaller. Buyers won't be able to afford the higher home prices nor the higher mortgages because of the rates, so they'll be knocked out of the market. Sellers won't list because they have 3% mortgages and won't want to trade those, or won't be willing to have to absorb price cuts so they'll be knocked out. The entire "months of supply" won't really change all that much, but the aggregate numbers of participants on either side will have shrunk greatly, and that the shrinking would eventually be catastrophic enough to seize up the entire housing market and force the Fed to lower rates.
I still think this is what's bound to happen ultimately. I am personally an example of the whole thing. I have a lot of equity locked in my personal home. I'd like to move a little closer in, get a little more land but be on one level (I'm on two now) as we get older to make maintenance and aging in place easier. I can't find anything in my price range (or that I'm willing to pay), and even if I could the mortgage amounts are more than I can stomach even with a very large down payment. So I just am not a participant at all any more (personally, not investment-wise), and through my agent I know there's a lot of people where I am on this track.
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Peter W.
Member since 2020 · 351 posts · 329 votes
2y
Quote from @Scott Trench:

I've discussed the REI market at length, and I've been a little skeptical of the smokies for a while now. It's a very regional play - or appears to me. I'm in CO. There's no world where I get on a plane to travel to a cabin in the smoky mountains in the US southeast. I can, for roughly the same price go to beaches, major cities, other countries, etc.

I also think that, generally, STRs are not like a one off way to build wealth. Buying a vacation home and thinking it brings in cash flow is a sure way to make the locals rich, as vacation rental communities are extremely seasoned at extracting wealth from visitors, perhaps especially including those who own remotely.

This creates a particularly challenging environment for the investor in a general sense:
- A regional vacation market
- Competing not with other rational investors, but with people who just have a mountain home; and therefore are fine to run it at a loss.
- Competition can and actually will increase in bad times, because people who own casually for second homes will try to get something instead of nothing by listing their properties for the first time.
- People will fight to give everything they have to keep their primary residence, but if their second or vacation home becomes a pain in the rear, they’ll sell. This can create huge swings in inventory.
- Buying that first STR property in a "hot" vacation market that isn't local therefore seems like one of the highest risk investments one can possibly make.
I will not be surprised to see pain in several similar markets around the country, perhaps including certain desert locations that surged in popularity, certain lake areas, and the pain may extend to even areas like CO mountain towns, despite the fact that unlike the smokies, people do travel from all around the world and country to get there.

The smokies are the most visited national park in America. I agree that the west is more beautiful, but they are accessible to everyone on the east coast. They are 8 hours from northern Florida, DC, Atlanta, Charlotte. No one west of the Mississippi is heading there for vacation, but there are way more people to the East than the west. while you may classify it as a “regional park” it gets as many tourists as the next three most visited parks combined. I have no opinions on your other comments though.
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Nathan W.
Austin, TX · Member since 2013 · 152 posts · 104 votes
2y
I don't own a pool cabin but I get their appeal. Some of these "pools" though look like large bath tubs. I don't understand the appeal of those at all.

Over the past few years investors have been buying cabins with a check list instead of looking at it the way someone looking to book a vacation does. If a cabin had a "pool", 4 or 5 bedrooms, and even a mediocre view it would sell. No one seemed to care how it looked, how it was laid out, how it was decorated, if the pool was appealing, etc...

There will always be ups and downs to the market. If you purchased a cookie cutter cabin though, you're going to suffer more than most.
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Collin HaysBusiness Member
OP
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
Quote from @JD Martin:

What you are describing are the unintended consequences of government overreach: The Fed has been tampering with interest rates to keep them artificially low for a number of years, in an effort to avoid a recession. That has led to inflation, which has led to the Fed's hand being forced to raise interest rates. That has resulted in mortgage rates over double what they were just 24 months ago.

As a result of that, 62 percent of homeowners are enjoying a mortgage of 4 percent APR or less. Like you, these owners are no longer players in the real estate game, as they would be foolish to trade and double their borrowing costs.

When 62 percent of property owners have been eliminated from the world of real estate transactions, that just leaves 38 percent to play with. This imbalance will take a generation to unwind. If the government further tampers with the situation in any way, the problem will only be exacerbated.

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Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
Quote from @Nathan W.:

This is the appeal, even with the small pool. Nobody has a pool in their homes so #1 it is an anomaly
#2 guests can enjoy the pool year round
#3 kids don't care how small it is
#4 there are adults who want to enjoy a heated pool, but feel self conscious in a bathing suit in front of others at a resort pool, now they have a private pool they can use with their family and not have that issue. This is a huge.
#5 kids are not complaining that there is nothing to do on a rainy day.

I have three 2 bedroom pool cabins with small pools with either none to mediocre views and I have a 3 bedroom cabin on a ridge with one of the absolute best views in the area. The pool cabins have always performed way better than the cabin with the amazing view.
I'll take a pool cabin with no view over a non pool cabin with an outstanding view any day.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @V.G Jason:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Mike Anderson:

Quote from @Steve K.:

Quote from @Jay Fradd:

Quote from @Steve K.:

These are a few examples that may indicate a trend, but what are the sales metrics looking like for the area? How many months of inventory? What is the list to sale price ratio? Average days on market?

Below are graphs I put together from stats in our local MLS. The most disturbing is the absorption rate in my opinion. It has went from 5 months to 13 month absorption rate in one year. A lot of inventory stacking up here in the Smokies.

Looks like you have a buyer’s market then indeed.

Not yet... Not even close. Needs much more a haircut first. Sellers are still nuts.
Just technically speaking... around 6 months inventory is considered a balanced market, less than 6 months is a sellers market and more than 6 is a buyers market.

I understand the basic metric i just question its value. How can one have a conversation about inventory being wherever (supply side) but never mention the demand side? I was just in northern Florida looking at condos last week, went to a few open houses all the realtors gave me the stock answer about inventory being low... Then when pressed turns out they haven't sold a condo this year and the inventory is rapidly on the rise (which i already knew).. However I should buy soon because its a sellers market, regardless of all the price drops yea ok.. There are quite literally almost no buyers right now, so with that being say why does the months of inventory matter.
These realtors are schmucks. Constantly pushing that narrative in other markets. I've looked at N Florida and C Florida hear the same ****, yet when I put offers out there back in Oct/Nov, I'm getting inquiries here the last week or so if I'm still interested. From 6 months ago? Thought there was a lineup from what you told me.

I think primo Miami still stands strong, but S Florida will get it's reckoning for a myriad of reasons here shortly. Not just from a supply angle.

that condo collapse disaster is affecting a lot of the older units no doubt.
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Victor S.
WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
2y
Quote from @John Carbone:

This thread just needs some optimistic positive thinking….where is Luke Carl at to fire everyone back up?

LMAO! shots fired
just checked his and his wife's profiles and both hadn't posted since September. Still active on YT, tho.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Victor S.:

Quote from @John Carbone:

This thread just needs some optimistic positive thinking….where is Luke Carl at to fire everyone back up?

LMAO! shots fired
just checked his and his wife's profiles and both hadn't posted since September. Still active on YI think they are still doing a module at BP con though. these things cycle and I am sure many of their clients got in early and are just fine. I dont really know what they do I
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Victor S.
WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
2y
Quote from @Jay Hinrichs:

Quote from @Victor S.:

Quote from @John Carbone:

This thread just needs some optimistic positive thinking….where is Luke Carl at to fire everyone back up?

LMAO! shots fired
just checked his and his wife's profiles and both hadn't posted since September. Still active on YI think they are still doing a module at BP con though. these things cycle and I am sure many of their clients got in early and are just fine. I dont really know what they do I

yeah, it's just odd they both dropped off around the same time. i guess pods/YT pay more than trying to catch fish on here.
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