Nick Gerli Profile picture
Jun 27 13 tweets 4 min read Twitter logo Read on Twitter
The Airbnb collapse is real.

Revenues are down nearly 50% in cities like Phoenix and Austin.

Watch out for a wave of forced selling from Airbnb owners later this year in the areas hit hardest by the revenue collapse.
1) What's scary for the US Housing Market is just how many Airbnbs there are.

Data from AllTheRooms shows 1 million Airbnb / VRBO rentals.

Compared to only 570k homes for sale.

Creates huge home price downside if struggling Airbnb owners elect to sell.
2) Ground zero for this Airbnb collapse is a city like PHOENIX.

Where the number of short-term rentals (18k) is more than DOUBLE the number of for sale listings (8k).

Mix the huge Airbnb supply with revenues down -50% and you get a cocktail for massive forced selling.
3) Another area with huge exposure is Eastern Tennessee.

Particularly a vacation town called Sevierville in the Smokey Mountains.

In this county there's 10x as many Airbnbs as homes listed for sale. While the revenue per owner is down nearly 50%.

4) Another area to watch out for is Central Texas.

Data from AllTheRooms shows that Airbnb revenues are down 40-50% yoy across most of the area.

Particularly in Austin, San Antonio, Uvalde.
5) Another area that is getting smoked by the Airbnb Crash is the Pacific Northwest / Mountain Region.

States like Montana, Idaho, and Oregon.

Fewer people playing out their Yellowstone fantasies + way more supply = 40% declines in revenue per listing.
6) And ultimately this Airbnb crash was to be expected.

The pandemic is over. Fewer people are working from home / vacationing in states like Montana, Texas, and Tennessee.

So the demand is way down. Just as the Airbnb supply went way up. So you get a crash.
7) What will be interesting is how "stubborn" Airbnb owners are in holding their properties.

Many of them are just now seeing their revenues down 50%.

But the mainstream narrative hasn't caught up to it yet. So owners might not realize the Airbnb crash is a broader trend.
8) Some Airbnb owners might elect to do a long-term rental in their properties instead.

But the problem with that is that there has already been a huge surge in long-term rentals hitting the market.

With vacant rentals in cities like Nashville exploding over the last year.
9) So if Airbnb owners "pivot" to long-term rentals, they'll likely crash that market as well.

Especially in dense urban areas. Which is where the majority of Airbnbs are located.

Check out the Airbnb heatmap in a metro like Phoenix to see areas with most exposure.
10) I think "newbie" Airbnb owners who bought over the last 1-2 years with a mortgage are in trouble.

They got in at a high price. And have a high monthly payment. And little margin for error.

They could be some of the first to sell later in 2023 when the season ends.
11) However, some of the more seasoned Airbnb operators who got in before the pandemic likely have room to work with.

They paid less for their Airbnb. Have a cheaper mortgage rate. And more experience.

They will be less inclined to sell.
12) I'll have more content and data on the Airbnb crash in coming weeks.

The data used in this Tweet thread came from AllTheRooms. They're a short-term rental data provider who tracks Airbnb supply, rates, and revenue for every market in the country.

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More from @nickgerli1

May 31
Wall Street Investors have officially abandoned the Housing Market.

With Redfin reporting a colossal 49% crash in investor purchases in Q1 2023.

This is the biggest annual decline on record.

Even bigger than the drop that occurred in 2005 right before the last crash. Image
1) Markets where Real Estate Investors bailed the most according to Redfin:

Atlanta: -66%
Charlotte: -66%
Phoenix: -64%
Las Vegas: -60%
Nashville: -60%
Jacksonville: -57%
Tampa: -54%

Wall Street pulled out hard on the pandemic boomtowns.
2) Higher interest rates have nuked investor housing demand.

With mortgage rates (6.9%) now trading way above cap rates (4.6%).

Indicating that Wall Street investors are guaranteed to lose money on their rental after paying debt service.

Thus - they have stopped buying. Image
Read 13 tweets
May 22
Mortgage rates back to 7%.

Meaning that the cost to buy a house in America is now approaching $2,700/month when including mortgage, tax, insurance, and maintenance.

Meanwhile, cost to rent is $1,850.

Biggest gap we've ever seen. Something has to break. Image
1) the easiest thing to "break" is Mortgage Rates going back down.

The next easiest thing to break is Home Prices coming down.

Likely some combination of the two will be required to save the US Housing Market from another massive collapse in buyer demand.
2) Mortgage applications to buy a house in mid-May were already at lowest level in 20 years.

Now they will likely decline further due higher mortgage rates.

I mean - how low can homebuyer demand in the US Housing Market go before something in the economy breaks? Image
Read 8 tweets
May 19
Realtors are officially quitting.

The growth rate in Realtors registered with the NAR officially went negative in May 2023.

That's the first contraction in the # of Realtors in America since the 2008 crash.😬 Image
1) Realtors are quitting because home prices are now on the decline.

You can see the very tight historical relationship between home prices 🟡 and realtors 🔵in the graph below.

It's wild how closely linked they are. Image
2) However, despite the recent quits, the overall number of Realtors is still very high.

Just over 1.5 million. Way higher than the previous peak in the mid-2000s.

Indicating that we are still in the very beginning stages of this housing downturn. Image
Read 7 tweets
May 12
The Immigration Crisis in a graph.

US Border Patrol reported 2.4 million encounters with illegal migrants last year.

By far an all-time high. Nearly 3x the long-term historical average.

A figure which will grow further in 2023 as Title 42 expires. Image
1) Here are the migrant figures for FY 2023 thus far.

You can see the US is already on pace to exceed its 2022 migrant encounter figures.

And that's BEFORE Title 42 expired. Which will likely increase the immigration wave further. Image
2) One thing that concerns me the surge in immigration is the impact on the American worker.

Particularly with regard to wages.

Wage growth has already slowed significantly in recent months. A huge surge in immigrant labor will likely lower it more. Image
Read 13 tweets
May 9
The Bank Credit Crunch has arrived.

The Fed survey of bankers showed 46% tightened lending standards in Q1 2023.

That's heavily in "recession" territory.

And nearing the contractionary levels experienced during Pandemic, GFC, Dotcom Bust, and Gulf War Recession. Image
1) Banks are tightening credit in response to fed rate hikes, economic uncertainty, and money supply contraction.

This tends to be a "leading indicator" of where the economy is heading.

And suggests a big slowdown in lending in H2 2023 that will lead to layoffs/bankruptcies.
2) Watch Loan Growth in coming quarters.

Right now real Loan Growth from Commercial Banks is at 5.3% YoY. Still positive, but starting to roll over.

Once loan growth starts heavily decelerating, and then goes negative, you know the Recession is "ON". Image
Read 15 tweets
May 3
Looks like the Recession is starting in the South.

Southern states lost jobs for the 3rd straight month in April according to ADP.

Meanwhile: Pacific/Northeast had huge job gains (+)

Big implications for real estate in 2023 if these trends hold. Image
1) A reversal in pandemic trends at play.

Southern states that gained most jobs in 2021-22 are the first to lose.

Home prices also went up the most in the South. So if meaningful job losses continue, expect home prices to go down.
2) Meanwhile - Pacific & Northeast absolutely crushing it on job growth in 2023.

Some of these states (CA & NY specifically) are still "adding back" jobs that were lost during the pandemic.

Which is why the industry breakdown is so heavily tilted towards Leisure&Hospitality.
Read 9 tweets

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