The Airbnb Bubble Popping Will Pop the Housing Bubble

Whether this leads to the "bubble popping" scenario described in the parent article remains to be seen.

If you’re a large-scale real estate corp, the houses are just income earners and as long as the income is greater than the n expenses, you don’t give a rats ass who lives there.

Not all of that housing is where people want it, investors are collecting properties like Pokémon, the vast majority of people can only afford a house half the price they could before interests rates rose, and those with mortgages are stuck with their low rates and little incentive to move (or at least sell).

So it’s not the lack of units that’s the issue, but a market that (surprise!) favors the wealthy and entrenched. If you had cash, houses could be found at absurdly low prices 12 years ago. But as always, the climate favored the wealthy whose credit score wasn’t wrecked, who had excess capital to deploy, and were willing to tie it up in real estate for 5-10 years as the market recovered.

0 - https://twitter.com/Econimica/status/1686999658483314688

Desired household sizes keep decreasing due to ongoing drops in marriage and childbearing rates, which increases housing units out of historical proportions.

This is compounded by the desire for vacation homes and the continuing opposition to increased housing in privileged areas such as the coastal cities.

Here's a fun graph from the US Census Bureau:

https://images.squarespace-cdn.com/content/54683a71e4b0768e1...

I bought a home last year during peak sales season in a great neighborhood in a major tourist town at a very reasonable price that had been on the market nearly a week before I made my offer. How? Because my HOA explicitly forbids me from using the home as a STVR, which kept most interested buyers away. The desire to capitalize the house in the future is a major factor in rising home prices. I can do a long term rental, but no Airbnb.

Want to dramatically reduce upward pressure? Start passing laws that severely punish STVR activity and prices will come down.

https://www.vancouverisawesome.com/local-news/vancouver-rank...

Vancouver, especially, has not seen salary gains in keeping up with the housing market. It is explicitly, unambiguously, huge amounts of foreign money. The housing prices in greater YVR correlate to foreign issues in China like Xi's crackdowns, or MBS' takeover in Saudi.

This is true for Greater Toronto as well, but very much less so over the rest of Canada.

This is nonsense. The US treasury market is $10^13, it will have no issue accommodating a few buy orders from the $10^9 club

5/7 of the days, relocating an entire city worth of knowledge workers across town to a computer screen is fairly nonsensical.

You force everyone to live within a radius of economic hubs if they want job mobility, or you have to be comfortable relocating your family every N years for upward mobility in your career (or take the career hit, wait for internal promotions, and risk the company folding).

It’s socially not great. It’s economically not great. It’s environmentally not great. Working from the office is just all around not great.

Speaking personally, I live in a good community, with a good quality of life, a good school district, I can afford a good home here, and I can provide for my family. I’ve setup roots and intend to raise my kids to adulthood in this house.

I’d be surprised if anyone could afford a competitive package that would convince me to relocate my family, pulling my kids out of school, selling my home, and paying the toll of a daily commute.

The rest of my career is remote. Companies can do hybrid. They can return to office. They can do whatever they want. Unless they support full remote, I’m not part of their talent pool.

I know many people who think this way. And that number is growing.

From my own team, if I had to guess, the actual number of productive hours are similar.

Granted, I think it probably varies dramatically by company / team, and I get the impression that some places take WFH much less seriously than we do (as in, not goofing off).

How do you know?

It's not going to show up as hotels always 100% full.

If there was demand from 10,000 tourists, and there were 7,000 hotel rooms and 7,000 AirBNB properties, then you could have 5,000 (71%) of hotel rooms occupied and 5,000 (71%) of AirBNB properties occupied and you'd think there was no shortage of hotel rooms.

But there'd be no shortage of hotel rooms only because of AirBNB. The reality is that there'd be demand from 10,000 tourists and only 7,000 hotel rooms.

> Usually tourist cities don't have a hard time building new hotels. Building new housing can be tough.

Well tough on them. Lots of things are tough. I have no sympathy -- new housing should be built, end of story. It's not sending a man to a moon, it's just regular old governance.

It's very clear that many tourists want to stay in AirBNB's. This is a valid consumer preference to stay somewhere that feels more like a home, in a place that feels like a neighborhood instead of a busy downtown, with a normal amount of space rather than a cramped hotel room, and at less cost. It seems silly to say that's a bad thing.

But in any case no -- I'm talking primarily about the fact that tourists spend more on restaurants and attractions and shopping than locals. While I'm assuming that landlords just remain landlords.

I often feel like a lot of social policy is simple as long as people understand the tradeoffs and everyone is on the same page. Unfortunately that has not been the case.

Here's a graph of the Bank Rate of the Bank of England (the UK's central bank) going back to 1694: https://fred.stlouisfed.org/series/BOERUKM

So, depending on your time frame, the 70s and 80s were abnormally high, post-2008 was abnormally low, and 5%-ish is "normal". (I think, if you keep going back, 5% continues to be kind of normal, but I don't have the data in front of me.)

It could be a 100% interest rate, without also looking at the cost / income ratio it's meaningless.

Or if you're ambitious you borrow money against the house to renovate it and build it larger. Slack off at an easy job and you have energy to do renovations in the evening.

Every 10 dollars borrowed to do renovations becomes at least 20 dollars in increased home value when the renovations are finished, and as a bonus you get to live in the newly renovated house. You don't need to sell, instead take out another loan against your now more valuable house - the bank is eager to help. It's called a "real estate career".

Compare that to working for a living as your "career": Every 10 dollars of productivity you put in for your boss turns to 7 dollars in wages and after taxes you have 4 dollars. Not to mention the taxes and tributes as a small business owner or independent.

Which is the smart move? Which is the fool's move?

If you talk to everyday people, what is their dream? What would they like to achieve? Will they say they want to invent something? Create a huge business? Become best in the world or at least in their region in some sport or hobby? Very few will answer this. Most will answer: "I want to own a bunch of condos and live on the rent". That is the dream.

The real issue in the US is going to come down to how many people can continue to afford multiple homes which is where rising interest rates and inflation both come into play. Anyone that bought a second home using an ARM may be forced into paying much more than they thought, and rising interest rates are going to put additional pressure on people with investment properties as they may need more liquidity sooner than originally expected to cover routine expenses.

The London rental market is if anything completely overheating at the moment due to lack of supply.

It’s not. The current mantra is that if prices go down, on a timescale of like 10-20 years they will eventually go back up. This is the way things have gone for at least the last century. AirBnB can go bankrupt tomorrow and wit will do exactly nothing to dispel this thought.

> With the current interests rates, this is straight up magical thinking.

Do you think that matters even the slightest bit? A nontrivial proportion of homeowners could afford to buy second homes outright at this point.

For our first meeting she’d chosen to wear a plain black halter blouse that showed her figure and bare shoulders to good effect and a peasant-style skirt of multi-colored, mixed- texture fabrics. Her dark cascade of hair was pinned up in a chignon, revealing her graceful neck. Her smile revealed even white teeth. She had the glow of the well-off and an unself- conscious confidence. She was poised, slightly shy and visibly curious about me.

In other words, she was stunning.

And needless to say, out of my league. "

If you talk to a lot of older Americans, a non-trivial portion of whom are invested in the housing market, their faith in the continued growth of the housing sector is akin to their faith in God. They’d rather sell their kidney than their second homes at a loss.

You would have to do a lot to get them to believe that the housing market is over.