Roofstock recently launched a short-term rental marketplace for properties that are typically used as vacation or seasonal rentals. These property listings include data from similar short-term rentals in the area, like average daily rent, annual revenue, and occupancy rate, so you can easily see the income potential of each property.
And with 83% of travelers preferring to spend their vacations near water, Roofstock’s current rental properties in top vacation destinations in Florida and Texas fit the bill.
Vacation rental boom
Redfin released a report last week showing that January saw the highest level of demand for vacation homes in over a year. Demand for second homes jumped 87% from pre-pandemic levels this January, far outpacing demand for primary residences (up 42%). This level is just short of the September 2020 record of 90% gain.
Source: Redfin (Feb. 2022)
Redfin Deputy Chief Economist Taylor Marr notes:
“Demand for second homes was strong in January as buyers tried to lock in relatively low mortgage payments…Mortgage rates surpassed 3.5% in January for the first time since March 2020, encouraging buyers who were on the fence about purchasing a vacation home to commit before rates increase further. While I expect demand for second homes to remain higher than it was before the pandemic, mostly because of remote work, it may fall slightly in the coming year as mortgage rates continue to go up and fees for second-home loans increase.”
According to Vince Breslin of PhocusWire, this trend is not only a result of pent-up pandemic demand for this type of home, but also the rise in flexible working has many looking for secondary residences. For investors, this increased demand has fueled further interest to purchase and rent second homes. And demand for vacation rentals isn’t going down any time soon. Breslin reports on a survey showing that 90% of people plan on taking a trip over the next 12 months that combines work and vacation.
Last week, AirDNA released its Best Places to Invest in Vacation Rentals report, highlighting that short-term rentals are likely to see a 60% occupancy this year, up 5% from 2020 and 10% higher than in 2019.
Source: KPVI from AirDNA (Feb. 2022)
Finally, according to Dan Latu of Business Insider who comments on the above data, “AvantStay’s rankings track with AirDNA data, which shows a 67% increase in nights booked in rural markets and small cities compared to before the pandemic.”
Millennials are the largest demographic entering the housing market. Kwame Donaldson of Zillow reports that home values in areas with a higher share of children under 18 are growing faster than elsewhere in the same county, “in large part due to demand from millennials looking for homes that meet the needs of their growing families.”
Source: Zillow (Feb. 2022)
A recent LendingTree report highlights the most and least popular markets for this generation. “Denver, Seattle and Boston are the metros where millennials make up the largest share of homebuyers. In Denver, 63.63% of mortgages were offered to millennials. In Seattle and Boston, the percentages were 61.35% and 61.08%, respectively. Miami, Jacksonville, Fla., and Tampa, Fla., have the lowest percentages of millennial buyers.”
Maurie Backman of Motley Fool jumps into the discussion, reporting on a survey that shows Millennials are specifically looking for smaller homes to purchase, 1,700 square feet on average, down from 2,400 square feet last year.
Gabriella Cruz-Martinez of Yahoo! News reports on the recent Fannie Mae sentiment report that shows only 1 in 4 people think it’s a good time to buy a home. “The sharp drop in January reflects growing concerns from both homebuyers and sellers, particularly among younger adults…On top of increasing home values and limited housing supply that have put a strain on home affordability for some time, mortgage rates are now rising as more than 45 million millennials enter their prime first-time home buying ages of 26 to 35.”
Dan Latu of Business Insider reports on the Fannie Mae index, highlighting that a whopping 80% of 18- to 34-year-olds believe that now is a bad time to purchase a home.
Source: Business Insider (Feb. 2022)
Vacant home tax
Debate is ongoing surrounding a proposal by San Francisco to tax more heavily the over 40,000 homes that are left vacant in the city. Sergio Quintana of NBC reports that 1 in 10 homes and condos in the city are vacant, and that San Francisco Supervisor Dean Preston told the outlet that “he is exploring a vacancy tax, aimed at owners who are keeping properties off the market, sometimes for years as a business decision.”
Amy Graff of SFGATE comments on this story, noting that Preston believes that in 2 years of implementing a tax, 5,000 homes would go from vacant to occupied, helping ease the short supply of homes. Graff reports that other jurisdictions have done this already. “Washington, D.C., also has a vacancy tax, fining owners $5 for every $100 of assessed value for vacant properties, and $10 for every $100 of assessed value for blighted properties. The tax generated $9.4 million in gross revenue in 2016.”
Camille Squires of Quartz (subscription required)reports on this proposal as well, stating that “If passed, the measure will impose a tax of $2,000 to $5,000 on housing units unoccupied for more than six months, ostensibly freeing up more rental units in a city where they are in short supply. San Francisco’s city legislature estimates the new tax could bring 4,500 new units on the market over two years. The new proposed tax would exclude single-family homes and duplexes, and apply only to vacancies in multi-unit buildings.”
For more on this topic, see George Glover’s recent Business Insider piece titled, San Francisco proposes plan to start taxing its 40,000 vacant homes to punish absentee landlords. Here’s how that could help ease the city’s housing crisis.