I honestly think Gatlinburg is completely disconnected from the broader housing market and the forces that move that. The Gatlinburg market, and its home prices, are completely driven and 100% dependent on one thing. Tourist travel to the area.
If the STR market remains strong it doesn't really matter what the broader market does. It's not like a house grossing $150k a year is going to suddenly sell for $400k just because the housing market takes a dump. As long as that place is grossing $150k a year, it will hold its value.
The downside of that is that there is a lot more potential downside in that market than other markets if STR travel does pull back. It's not like Aspen where the travel market could pull back 50% and home prices would probably barely move because there are more people that legitimately want to own a home in Aspen for themselves than there are homes available.
We can see that in the land value as well. Land in Aspen or Jackson Hole or even Destin is significantly more expensive than Gatlinburg. There is only so much land close to the ski slopes or a block off the beach, and a lot of the rise in prices has come alongside a rise in land value. That's not true in Gatlinburg where the land is still dirt (heh) cheap. You can still find a nice building lot for under $100k and $250k gets you acreage and a view.
So a 4br pool house a block or two off the beach and a 4br pool cabin in Gatlinburg may both cost $1.5m and gross $150k, but more than half of that new higher price in Destin is the land cost while more than half of the increased cost of that pool cabin in Gatlinburg is nothing more than increased margin/profits for the builder.
That's what's so crazy about this market. I've never seen a market like this where a $70k plot of land and a few hundred K worth of materials builds a $2m house, but that's where we're at. I realize building costs have gone up but not by THAT much in the last year. Lumber is historically high right now but it's actually cheaper now than it was last summer, and a LOT cheaper right now than it was spring 2021. Yet home prices are up 100% without land prices increasing at all. It's all just builder profits because investors are willing to pay that much and no one is dumb enough not to charge it when there are 100 people lining up to pay it. I think that's very different than Destin or Jackson Hole where there is a limited amount of land available and everyone knows there's never going to be more. There is a LOT of room for those builders to lower their prices drastically and still make good money if the STR profits dry up and investors are no longer willing to pay a 70% markup because their underwriting tells them it still makes sense financially.
I can't speak for everyone else, but I am traveled out. We have traveled a ton since being cooped up with covid and now we're burnt out. I don't think we're alone in that. I know people like to say "travel has fundamentally changed and it will never be like it was in 2019 again", and I think I agree, but people absolutely said the EXACT same thing about work from home and now 90% of those work from home stocks that were up 400% are all the way back near their 2019 levels.
It is going to be an interesting few years, for sure!
