The short-term rental market has continued to grow according to new data from AirDNA. Reportedly, current available STR listings are sitting at 1.39 million, up 25.5% year-over-year (YoY). Further, demand is up 18.2% YoY, and revenue was up another 22.6% YoY. Overall STR occupancies so far this year are lower than 2021 due to the increased supply.

Source: AirDNA (August 2022)

“[O]ver 23 million nights were stayed in a short-term rental in the U.S. during the month of July, which was 18.2% higher than last year and 20.6% higher than in 2019. Last year, a lack of availability pushed occupancies to record levels and many guests were unable to find accommodation in popular locations. Since then, hosts and investors have brought hundreds of thousands of new listings online.”

For bookings in July, a record number (26%) were considered last-minute. Further, the luxury segment of the market is seeing faster price erosion, with lower-priced STRs seeing a bigger boost this year.

Source: AirDNA (August 2022)

Craig Rowe of Inman (subscription required) reports on real estate rental listing site Zumper’s new move into STRs, highlighting that the company raised $30 million in a Series D round to “push into the ever-evolving short-term rental sector.” Specifically, Zumper will allow STR listings on their website, which reportedly gets 178 million annual visitors.

A second Inman article by Taylor Anderson reports on the Jeff Bezos-backed startup Arrived Homes, which is an investment platform that sells fractional ownership of STRs starting at $100. In commenting on the news, Arrived’s CEO Ryan Frazier is quoted as saying: “Over the past year, Arrived has helped thousands of Americans gain access to the financial benefits of property ownership for the first time in their lives…We are excited to bring our model to vacation rentals, the fastest growing real estate segment right now.”

Mortgage pain

With mortgage rates increasing, more and more buyers and sellers are sitting on the sidelines. This significant drop in mortgage origination volume is causing trouble for many lenders across the country. According to the Mortgage Bankers Association (MBA) refinance volume is down 83% YoY, and purchase volume is down 23% YoY. As such, we are seeing lenders all over the country scale back operations.

Connie Kim of Housing Wire reports that Homepoint recently laid off 500 employees in client support and underwriting roles. According to the article, “[r]educed volume and lower margins due to surging rates and an aggressive pricing strategy from its rival United Wholesale Mortgage were attributed to the losses.”

Kim reports that in an effort to increase market share, lenders such as UWM cut prices on all their loans, which is “wreaking havoc on other lenders, such as Mountain West Financial and loanDepot, forcing them to exit the wholesale channel.”

Similarly, more Housing Wire articles outline the ongoing layoffs such as Freedom Mortgage and Citi, which have conducted both layoffs.

Anna Hrushka of Banking Drive reports that USAA’s banking division has also cut staffing levels due to the drop in demand for loans across the board. Further, American Advisors Group (AAG) is also reported to have conducted significant layoffs.

Small markets

Na Zhao of the National Association of Home Builders (NAHB) reports on the Home Building Geography Index (HBGI), which shows that building activity is increasingly shifting to low-density and low-cost markets. Inner suburbs and large metros saw a decline in single-family home construction, while smaller markets saw a jump.

Source: NAHB (September 2022)

“NAHB’s HBGI shows that single-family home building in outer counties in large and medium sized metros has expanded to a 19% market share in the 2nd quarter of 2022 from 17.4% in the pre-COVID period. Meanwhile, the market share of new single-family constructions in rural areas increased from 9.4% to 10.4%.”

Further, investment interest in suburban office space is on the rise. Konrad Putzier of the Wall Street Journal and published by Fox Business notes that “[o]ne of the world’s biggest sovereign-wealth funds and its U.S. partner are buying a majority stake in 53 suburban office buildings in a deal valuing the properties at $1.1 billion, a major bet that remote work will boost demand for workplaces close to residential areas.” Reportedly, in Q2 2022, downtown office vacancy rates were higher than suburban ones for the first time in decades.

Natalia Siniavskaia of NAHB reports that despite the pandemic demand for more space, building lots have actually been getting smaller. According to a new survey, over two-thirds of new single-family homes sold in 2021 were on a lot smaller than one-fifth of an acre. This is the strongest demand for smaller lots on record.

Jeff Shaw of REBUSINESS Online reports on suburban rents, which are closing the gap with urban rents. A study found “that median asking rents in cities were $1,928 per month in July, while suburban rents averaged $1,821…That’s a stark difference from just a few years ago, when lower rents lured many remote workers to the suburbs to save money during the pandemic.”