[00:00:11] Good morning.

[00:00:13] Depending on when you’re watching this.

[00:00:16] So we have this situation where people are concerned and I think rightly about the viability of short term rentals going forward in the economy in the sense that if Vacancies are up, the highly levered asset that is the short term rental might be on the chopping block, which might cause home prices to go down.

[00:00:42] I don’t know, but let’s get into it. Here is a fascinating article that came up from Zero Hedge. We’ll go over some other things as well. But just in looking at this, something popped. Google searches for sell my airbnb surge as travel downturn worsens. Now, I know it seems silly to rely on a search engine to somehow prognosticate or forecast or explain current issues within the marketplace. I know that seems weird, but man, their data is fantastic. And when that kind of stuff happens, I think it should at least cause you to raise an eyebrow. And so here’s what we’ve got. It says airbnb. Owners who snapped up homes in the last several years during the area of free money are facing a downturn in the short term rental market that started in the second half of 2022, with some b and b operators and cities facing 50% revenue declines, according to a recent note published by Reventure Consulting CEO Nick Gurley. I guess that’s what his name is. I should probably look up how to pronounce his name, but I just haven’t gotten around to it. He’s quoted saying, I believe these losses will cause a wave of distressed selling from Airbnb operators in 2023 and 2024. Now let’s just go over like running a business, okay?

[00:02:06] You don’t want to sell your asset. Let’s say you have an income producing asset and all of a sudden it’s not producing income you don’t want to sell, right? You want to believe that you’ll outlast this problem and that you won’t have to sell and it’s just a temporary thing. But month after month of not having any money coming in and then having maybe some tenants, some short term renters maybe kind of screw up the place or give you a bad review and you’re not making any money and it keeps going on. And all of a sudden, maybe the job market is getting kind of dicey because the Fed has decided that they need to work on employment. They need to soften employment. Soften employment, which means they need to get people fired with their policies.

[00:03:00] That’s not boating well for you, keeping your asset. And so this is a theory that’s gone forth.

[00:03:08] I feel like there’s some weight to it and does make some sense. Airbnb’s CEO recently warned of a booking slowdown, while airlines and retailers have warned of consumer spending. JP. Morgan, Goldman, bank of America, Barclays, and Cities have added more gloom as consumer credit card spending crashed in.

[00:03:25] You know, the idea is that people don’t have any more money.

[00:03:31] Discretionary cash to be able to go and stay at these airbnbs. They’re traveling less. That’s the theory. Clearly, the Fed pinning interest rates at two decade hides is leading to major economic cracks as recessionary slowdown in travel, demand emerges and crimps revenue for highly leveraged airbnb operators, which depend on revenue streams to pay for their mortgage payment. And that’s right. And look, this is the spot that I think is blind for many of the housing aristocracy in the United States. Those learned professionals that are looking over these types of things are not paying attention to the fact that they said that subprime mortgages were dead. Okay? And that’s fine. And they say that the reason that we’re not going to have any sort of softness in the market is because you can’t have a sub. It was the subprime borrowers that were the problem last time, and now those people don’t exist, and so we’re not going to have issues. But there’s the short term rental mortgages, which are highly leveraged, and they’re all based on past income or showing income on a property. And if you don’t have any income on that property and you got a mortgage on it, how are you going to pay it back?

[00:04:50] Gurley says the revenue collapse is the most notable in the Southwest and mountain west areas of the country, where airbnb revenue per listing is down 40% to 50% year over year, with owners in cities such as Austin, Phoenix, Denver, and San Antonio taking the hardest hit. One X user posted, the great airbnb exit has begun. So they’ve used X in the article versus Twitter, which is fine. Twitter’s dead, apparently.

[00:05:16] But look, there’s certain places that were really, really hot that people always wanted to be in. Like Austin. Yes, right. Everyone wants to be in Austin right now. It’s growing. And certainly Phoenix has always been a bellwether for the economy as far as housing. You’ll know what’s going on nationally when you see what happens in Phoenix. That was the side of all the ibuyer ridiculousness between Redfin and Zillow and all those people were involved in that mess. Denver, you’ve got such wonderful tourist destination. There the mountains. I’m surprised that we’re not seeing more softness in places like Florida. Anywhere there’s a beach living in St. Louis. We have no beaches, have to go a very long way before we can get to the beach. So I’ve used an airbnb down in, I don’t know where it was anymore. It was in Alabama or Mississippi or something. But I mean, anyway, there’s some tweets and things in there and then there’s anecdotal evidence that says if the economy softens, the people who own airbnbs may be forced to sell. And then another tweet that says, hearing from multiple reports, I know that airbnbs are slowing down. Are we going to see a big sell off in the short term rents in the near future? And then they say, I personally prefer a hotel at this point, unless it’s a big family trip. I agree.

[00:06:38] And then it says, and what’s up with the Google search? So my Airbnb point unless it’s a big family.

[00:06:45] I mean, that’s the way it’s gone. Interest over time. I mean just ramping up anecdotal things like see here’s an article from Newsweek if you don’t like, I mean, here’s fall in Airbnb Listings revenue sparks housing market crash Fears. It’s not a new article. It came out in June of this year. And then that combined with this a prominent Investor Reduces stake in Airbnb as CNO and CTO sell shares, what’s behind the insider sell off? So do they know something that we don’t know?

[00:07:18] I have no idea. I just thought it was kind of interesting that everyone is kind of we’re all kind of watching this space, or at least I’m kind of watching this space because there is a hypothesis there that it’d be interesting to see if it turns out by the way, I do not like economic pain.

[00:07:45] The idea of being gleeful over someone else’s loss of property or loss of financial well being is not, is just not who I am.

[00:07:56] But I’m looking at it in the sense or in the context of the greater housing market.

[00:08:02] Do you know people still call me and they say, hey, I want to buy a rental. I want to buy a rental. I’m going to do Airbnb and I’m going to make all this money. And you don’t want to tell people that they can’t.

[00:08:24] I don’t think people realize how developed the markets become and I don’t think people realize how much goes into it. It’s certainly not passive. Okay.

[00:08:38] And then I think that their assumptions on Occupancy tend to be misguided or optimistic. Let’s go with optimistic.

[00:08:49] But with that I think I’m going to head on out. I just wanted to bring that to if you are interested in Airbnb, maybe pause, maybe do some research and say like, hey, does this really make sense? I’m saying right now in October of 2023, does it really make sense we’ve had all this dramatic run up in prices of home prices.

[00:09:09] Does it really make sense for me at this moment when I could be what, I could get five and a half percent risk free treasuries right now, literally just buy them?

[00:09:22] Is this really where I need to be?

[00:09:26] And if your answer is still yes, then you should give me a call.

[00:09:31] And if not, that’s okay too.

[00:09:35] Goodbye. Bye. I’ll see you probably tomorrow.