All Forum Posts by: John Carbone

Demand is definitely down.  In town and got the first front row spot at walmart.   Another identifier is the Local Goat.  No matter what time of day that parking lot is jammed.  It has not been full each time I have driven by it.  No lines at the goat coasters either.  So yea demand is down no question about it and there is my anecdotal evidence ;)

As said by myself and a couple others, it’s difficult to obtain an even ratio between the two. If you book a lot on vrbo then Airbnb algorithm will throttle you back on searches, similar with vrbo. I wouldn’t focus too much on it. It’s a down year for the smokies this year in general, some are saying 20 percent decline in revenues is considered to be the expectation this year. 

Brandon, from your post it sounds like you're booking out pretty well. If so, why do you care which site you're booking on? Our place in Destin is booked out a solid with 80% on AirBNB, 10% direst listings and 10% VRBO. We're always checking the listing on both sites, but personally, I don't care where the bookings are coming from. I only care that the calendar is full and prices are high.

Am I missing something here?

Great comments on this thread. Below are my two cents.

Unlike the stock market, which is more influenced by market sentiment in the short term, real estate is driven by local supply and demand. Additionally, the real estate market is not homogeneous. For instance, the demographic that purchases $400,000 properties is not the same as the demographic that purchases million-dollar properties. There could be a surplus of million-dollar homes while there is a shortage of $400,000 homes. Therefore, it is necessary to examine more granular information than just metro averages. My point is that national averages and even metro averages may not apply to any specific segment of the market.

Seasonality is a consideration in any market. Below is a diagram showing seasonality effects based on property characteristics.

Interest rates and inflation - I believe interest rates will decrease before the 2024 election. The number one concern of politicians is getting elected or reelected. It will not be to their advantage to have high inflation or interest rates. 

1031 exchange - We have completed over seventy 1031 exchanges so far. Considering the potential limitations on 1031 exchanges that the Biden administration may implement to increase tax collections, the advantage of 1031 exchanges may end for many people. (source: https://www.cnbc.com/2022/04/26/what-bidens-proposed-1031-exchange-limits-mean-for-investors-economy.html) Therefore, despite the high-interest rates, anyone considering a 1031 exchange would likely want to complete it before 2024.

@Carlos Ptriawan - I am curious why you feel the Midwest is the least sensitive to interest rates. Can you elaborate please.

@Stephen Rinaldi - I totally agree with you that if interest rates even appear that they're going to decrease, demand will drive up prices. In our January newsletter, I wrote an article about the high cost of waiting to buy. The only reason it would make sense to delay a purchase is if you believe either property prices or interest rates will decline enough that the acquisition cost in monthly debt service will be lower. I see no chance that either will occur.

The Fed continues to increase interest rates until they see a significant decline in inflation. They have already achieved what they wanted, but they're looking backward as opposed to looking forward, so they can't see this. Consequently, interest rates will continue to increase.

We are already seeing prices increase for the segment we target in Las Vegas. According to my estimate, if property prices increase by as little as 5%, it will cost you more, even if interest rates decrease to 5.75%.

Consequently, there is no scenario that I see where it will not cost you more in the future than it does today. However, that assumes you are in a high-appreciation market like Las Vegas. Many cities in the US have had no or limited appreciation for years. This could be a different story, and I have not evaluated this scenario.

What size is your cabin?

I think smaller less expensive cabins do better on Airbnb. 

We have a large 6 bedroom cabin and it does very well on Vrbo and very little bookings from Airbnb.