Smokies "hiney showing" thread

[Collin Hays]

 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

[Collin Hays]

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.

 A few counter points.

1.  People do come from “all around the world and country” to the Smokies. 14 million visit the Great Smoky Mountains National Park each year.  Far more than any other national park. We have many homeowner clients - all over the country - with Smokies investments. For the long term investors, the returns have been spectacular.

2.  Someone renting their luxury cabin for $150 a night isn’t necessarily an irrational investor: If they bought the place 15 years ago for one fourth of today’s prices, and the home is paid off, $150 per night might make perfect sense.