[00:00:02] Speaker A: This is short term rental management, the show that is all about short term rental property management with your host, yours truly, Luke Carl.
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It's a lot of fun. Stressions.com here we are. Here we are. Short term rental management. I've got two rock stars. It's an honor to be here in a room with such good looking, awesome people.
And today we're going to recap numbers of 23, maybe throw a little 22 in there for fun and talk about the future and what we think things are going to look like, especially in the world of numbers and spreadsheets. And of course, we have Dave Meyer, who is the number guy. Dave, do you want to say hey?
[00:01:07] Speaker B: Hi, everyone. Thanks so much for having me. I'm excited to be here.
[00:01:11] Speaker A: Absolutely. And Avery, who is the one and only Avery, who's the biggest, baddest short term rental real estate agent on the planet. So, Avery, say hello.
[00:01:25] Speaker C: Hey, guys. Thanks for having me, Luke.
[00:01:28] Speaker A: It's my pleasure. I'm not exactly sure. I still think maybe you're having me, but that's okay.
So I guess, Dave, I'll start with you if you can give me kind of your spiel on 23, how you felt along the way as far as rents and maybe gross rents and such.
[00:01:48] Speaker B: Yeah, 23 was a surprising year for me. I felt when we were heading into the beginning of this past year that the modest correction that started at the end of 2022 was going to continue. And I've never been a home crash person. I've been pretty adamant that I felt like there was a very strong floor to the housing market, but I thought we'd see declines of two or 3%, something like that this year, and instead we saw growth of two or 3% in housing prices. So we can get into that. But I was surprised by that. And the same thing sort of goes true with rent. Rents have come down in terms of their growth rate, so they're no longer growing 15% a year. But that's good. That was very unusual. And rents actually grew about 5% in 2023, which is above average. Normally rents grow around two or 3% a year. And so both of these things, I didn't expect rents to fall, but I think the housing market and the rental market showed a lot of resilience, and I don't have as big an expertise in the short term rental space as you two, but from what I understand, revenue from short term rentals were down a little bit, but that's really from peak times and are still up well above pre pandemic levels.
[00:03:14] Speaker A: Yeah, it was a difficult thing to gauge, quite frankly. This 23, because we came off of this 22, which was a unicorn. It was crazy. It was insane. I'm actually noticing it in all facets of life right now. I ordered some things on instacart this morning, and the price tag, I think it was a shampoo, as a matter of fact, and the price tag was outrageous. And I'm not really an expensive shampoo kind of guy, so it blew my mind. And I'm sitting there like, well, I think this is just real now. This is just reality. This $30 bottle of whatever from the grocery store.
[00:03:50] Speaker B: Whoa, that must be nice shampoo.
[00:03:52] Speaker A: I don't know what it was, to be honest, but it was expensive.
But, yeah, you do hear a lot of the down rates in short term, and I think a lot of that had to do with the saturation term that everybody loves to use all the time. And I did see a lot of that where a lot of folks seem to have gotten in in the past year and a half, two years, but I'm not seeing it in my rents. That's the only thing. All I can do is talk about actual historical data from my portfolio. And I just did an update on my numbers, which, again, I don't have an actual full on end of year number just yet, but I'm literally neck and neck. I mean, we're talking minuscule amount of difference, and it is a slight decrease, 23 to 22. But I mean, like, 0.4% across my.
[00:04:46] Speaker B: That doesn't count.
[00:04:47] Speaker A: Yeah, no, it doesn't count. So I basically broke even. Right. Which I'm extremely happy with that. I was planning totally 5% to 7% decrease in 23. And now that it's over, I'm sitting here like, what is everybody talking about?
And I didn't feel like I really worked any harder or there was any differences. I certainly don't pay any more attention than I used to, of course. Been doing this a long time. Avery, what did you have?
[00:05:13] Speaker C: Yeah. Okay. I was going to say, I'm going to interrupt you, otherwise, you're just going to keep going and never stop.
Do you think that that's because of the type of markets that you own in? Purposely, though, because real estate, whether it's short term rentals, long term rentals, or sales really is more of like a regional thing than it is across the board. So what we saw, I think that the way we've invested in short term rentals has been a pretty cautious way to do it. Like only in areas where it's been allowed and the economies of the areas have been dependent on it since the 60s. But maybe if people invested in metro markets like Dallas, for example, where it has been outlawed, or I think that there's different types of markets that probably saw different things this year from that.
[00:06:06] Speaker A: To answer your question briefly, yes, and I've heard you say this many times, so it's difficult. We're married, by the way. If anybody didn't realize that this is difficult for me to. But yes, I guess in my perspective it's like, well, why wouldn't my properties do mean, first of all, I've had them for a really long time. I have more reviews than anybody, and I'm in towns that nobody does anything but go on vacation.
I'm not short terming in Cleveland, I'm short terming in towns where nobody lives and people go on vacation. So yes, I do. I think that the market is huge, obviously, but even more so for me personally, just from the landlord side of things, the longevity of my properties has been huge, I think, and it's very easy for me to come up number one or number two or three or first page for sure, on a search for anybody looking for a property to rent in one of my markets because I have so many damn reviews and I have smoking good reviews, which is a huge part of the vacation rental space. It's the biggest downside, quite frankly, in my opinion, compared to long terms.
But as time goes by, I guess since we've been in this space so long, I feel like I don't need to think or worry about that stuff as much as the average Joe who's brand new and not only nervous because they're brand new, but also don't have the reviews to kind of boost.
[00:07:39] Speaker B: I think another thing that matters here is people like me come out onto these shows and quote averages, and averages have their use, but they don't really tell a full story about what's going on. And from my understanding, if you dig deeper into the data and just have conversations with people, the people who are doing well are still doing well, and the people who have really good quality properties that are going to be desirable even if some demand gets pulled out of the market, are still doing well. And I think if you dig into that, that makes a lot of sense, right? Like, we saw this gold rush in short term rentals where people were getting in.
Not everyone was necessarily good at it. And it's becoming a more efficient market, just like any other asset class becomes an efficient market. Like, the cream will always rise to the top. And for a while, short term rentals was in a stage where you could just throw some money at it and you would probably do well. And now we're just reverting back to, I think, a much more normal market. And if you look at revenue for people who, like you said, Luke, have good reviews and are quality operators, I bet it's not all that impacted by what's happened in the last year.
[00:09:03] Speaker A: Where do you think that comes from, Avery? Where are we finding these people that are complaining that their numbers are down and what can they do to. I can tell you my numbers are not down, so I don't even go, yeah.
[00:09:15] Speaker C: So I think there's two main types that we see coming, saying, like, oh, I want to sell. And it's the type that just saw the interest rates in 2021 and 22 and said, oh, man, the mortgage on a beach house is going to be, how much? I can get that, and I'll just put it on Airbnb and make a bunch of money when I'm not using it. So the people who truly weren't looking at it like a business, they were kind of looking at it like a toy that they could make money with. And when it came time to actually run the business, maybe were like, oh, crap, yeah, this is a business, and now we're not really doing so great with it. The other type, I think, are the buyers who really wanted to get a property back then, but maybe weren't in a financial position to really be able to do so in that competitive of a market. So they bought something a little too far away from the attractions, and it worked in the boom. But now that we're back to being more of an efficient market, as Dave said, those things that are a little too far away aren't working as that. And then we did see a fair amount of over leverage.
So I guess there's three types. So we've definitely seen people who did really well with one and then scaled to two or three really quickly just off of equity of the other ones. And then if they made one wrong decision or had one property that might have been too far away, or maybe they didn't run the numbers great on, or maybe for some reason it hasn't performed the way they wanted it to. It kind of knocks down the entire house of cards. So I would say those are the three types that we see saying like, hey, you know what, I think we might need to sell this thing.
[00:10:53] Speaker A: Now, when you say over leverage, what are you saying most often?
Refinancing the first one or something?
[00:11:01] Speaker C: Yeah. So I think a lot of influencers out there will, and I've seen the same format across multiple influencers where they'll say, hey, look at this house that I bought for 400,000 in 2017. I just pulled 600,000 out of it to buy 17 more. And I know that that first house is, there's no way it's cash flowing anymore. So what they do is they'll leverage themselves into 1000 properties doing that, but then none of them are cash flowing. And they're like, now what do I do? So I saw lots and lots of influencers doing that over the past few years, saying like, oh, look at the power of real estate. I put down 40,000 on this $400,000 property and I just pulled out 600 from it. And I think that got people behaving in a little bit of an irresponsible way. But Dave, did you have something to ask?
[00:11:50] Speaker B: Are those the same influencers who say that they own like 10,000 units because they've participated in like three syndications?
[00:11:58] Speaker C: Those are different ones, actually.
[00:12:02] Speaker B: Well, yeah, I agree. I think it's very dangerous to look at what those people do. And I think it's a common example. People are just trying to scale and latch on to that rapidly appreciating equity at the expense of cash flow, and that can over leverage you. I think just the other thing we were talking about with what properties are doing well and poorly is this is just a personal philosophy about real estate. Is like the reason I only try to buy things that are b class or higher, whether short term or long term, is because during difficult times, there's this, people call it like the cannibalization of the market, where basically if there's less renters or there's less guests, people who have nice properties can always lower their rates and keep their place filled. But if you have something on the lower end of the spectrum, there's nothing you can do. Like all of a sudden now, people who have nicer places than you are competing with you on price, and you can't do anything because you can't make yours any cheaper. You could make yours cheaper, but that's probably not going to be super effective, and you're just still offering something that's not as nice. And so I think there's probably continued strength in places that have the best amenities that are really nice and where the owners have some flexibility on price to just maintain their occupancy rates, whereas these less nice properties, they do fill an important part of the market, but they get jammed a little bit during economic difficulty.
[00:13:36] Speaker A: Well, it's great to hear you say that, because when it comes to my long term rentals, I like that sweet spot of $1,300 a month where I can get somebody that is a contributing member of society, and I can give them a really nice home to live in with granite and stainless, and there's a decent chance at that price range, they're not going to completely tear it up. And that's my bread and butter.
[00:14:00] Speaker B: Exactly.
[00:14:01] Speaker A: My peers actually look at me like I'm crazy. They're like, you're putting those countertops in a rental house. And I'm like, dude, they're really not that much more than the vermica, and they'll last a lot longer.
Stand up to anything but a hammer pretty much.
And it's interesting you mentioned that. Again, back to the short term thing, because here's another thing I saw in 23 was these amenities are coming out of the woodwork, and it seems like these folks are trying to compensate in some way massive amount of amenities on these houses that, in my experience, it's not really that necessary. It's an old Avery quote from years ago. Cute, clean, and comfortable. And to me, again, that's my bread and butter. Yes, I have a nice coffee station. I've got nespresso machine, and I've got kitchen gadgets and stuff. And of course, my house is. I've got very nice sheets and towels, but I'm not going over the top with this craziness that you're seeing in these big, expensive homes at this point. And it's nice to hear you say that. So, Avery, what do you think? There are people over amenitizing? Is that a word?
[00:15:15] Speaker B: It is now.
[00:15:16] Speaker C: Yeah, I guess. Know, I haven't really seen too much of that. I have seen people putting in pickleball courts, like Rob Abbasolo just put in a pickleball court. But it has made like that has been something.
Do you have data on?
[00:15:34] Speaker B: I've just. I've always wanted to do it. I just think I can't imagine building a pickleball court. Is that expensive?
[00:15:42] Speaker A: It can't be.
[00:15:44] Speaker B: Yeah. And I would imagine it would really dry. It's like the hot tub thing. I own a short term rental in a ski town, like, you have to have a hot tub. They've proven that it is worth the investment, and I would think a pickleball court might do it in Florida. Something like that. People love it.
[00:16:03] Speaker C: He mentioned the number on the pod. He was on an episode of my podcast recently, so I can't remember the number, but it's on there. He talked about it, but I haven't seen anybody really do anything that has been over a minnetizing. I don't think so. No.
[00:16:20] Speaker A: I guess I'm seeing it.
Your lovely clients, they come to me, and it's almost like they feel like they need a helicopter pad on their roof at this point to get bookings. And I'm here to tell you, you don't. My numbers. Again, I'm literally neck and neck. I'm within a couple of grand across my entire portfolio for the past two years, and I don't have any of that crazy stuff. I just try to be as hospitable as I possibly can. And again, is it your location, too?
[00:16:48] Speaker B: Is your location really good? Yeah, I feel like that's ultimately what people want.
[00:16:53] Speaker C: We do have good locations. And again, back to the location thing. We're seeing people. Okay. I do have a fourth type who has come to us with problems. So there's a lot of lists that will come out. This has happened three or four times over the past five or six years, where lists will come out, whether it's like a big property management company or a big short term rental data company that will say, these are the top 25 best places to invest in short term rentals. What they don't do is go into any kind of location detail. So, for example, down here in Florida, so the 30 a area, or Destin or, like Fort Walton beach, you have to be south of highway 98. You cannot have to drive to the beach.
We'll take Navarre Beach, Florida, for example. So that's right around the corner from us. Navarre is there's a bay, and then there's, like, a little barrier island. It's. Navarre beach is where you want to be. Navarre beach is the barrier island where all of the top performing short term rentals are. But what people do when these lists don't provide any sort of context as to where they'll buy. On the wrong side of the bay. So they'll buy not on the island. And the other side of the bay is very residential. People don't go to visit the bay. There are zero tourists on that side, but they just see water. And think, oh, this is where I need to buy. And so they come to us and they're like, we're not renting. And there's nothing worse than having to tell somebody that there's not really something they can do to fix it and say, actually, I mean, this is not the location that you want to be. And that's happened every year for the past three or four years. It's something that we didn't represent them on because we would tell them not to buy right there, but where they've bought on the wrong side of a bay or the wrong side of 98, and there's like, nothing you can really do to fix that.
[00:18:44] Speaker A: I saw a list recently that listed a town, and I looked into it and I dove real deep, and it turns out that that town only has permits for 120 vacation homes. And this was on this. Wow, this town was on the top of like four different lists. And I'm sitting there like, well, yeah, if you can be one of the 120, then maybe you can do okay.
[00:19:07] Speaker C: You know how I know the lists are bullshit? Because Starkville, Mississippi, where I grew up, has been on two in the past two years of best places to buy a vacation home. And I know for a fact that that is not true. Although ironically enough, we do own a vacation.
[00:19:19] Speaker A: We do have a vacation home there.
[00:19:21] Speaker C: Yeah, we have our own space when we go visit my, we don't rent it.
[00:19:25] Speaker A: We're actually not even allowed to rent it. But, yeah, that's a funny.
[00:19:27] Speaker B: So it's an actual second home for you?
[00:19:29] Speaker A: Yes.
[00:19:30] Speaker B: Okay.
[00:19:32] Speaker A: Did you know there's actually a company that will help you find and purchase your first or next short term rental? The short term shop is the premier short term rental acquisition company.
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[00:20:05] Speaker B: Well, as someone who makes lists, I apologize, but I'll also say that I have never made a short term rental list, so I'm innocent there. But I will say that the point of these lists are not to say the whole place is good. It's to help you narrow down your search.
[00:20:24] Speaker A: That is true.
[00:20:25] Speaker B: If you want to look at these lists, think about how you're using them. They are not an endorsement of every property in that town. They are just like there's probably some good stuff in this town. You got to go find the diamond in the rough there. Not everything is going to work for you, even during great times in the housing market.
[00:20:47] Speaker C: Yeah, you're right about that. They are in control of their own destiny. And you should use any of that stuff, lists, calculators, all of these as a guide and not as gospel. But I do want to segue into another topic for you, Dave, real quick. So let's talk about the housing market in general, not rents like the actual sales of properties, because that's been a big topic over the course of the year. I've watched more CNBC than I have the rest of my life combined just trying to watch the market learn.
So what do you think about what's happened this year? The big thing that I am not a data person, I am just a real estate agent. But what I've seen and combined with what I've read is that less homes were sold, and I think this was in Wall Street Journal, less homes were sold in 2023 than in the last 15 years. So since about like 2000.
[00:21:42] Speaker B: And that sounds right. Yeah.
[00:21:44] Speaker C: So everybody's like, I'm waiting for the crash. I'm waiting for the crash. But it happened right under our noses. It has crashed. So I love your thoughts on all this.
[00:21:54] Speaker B: Yeah, I think that's a great point. I won't get too nerdy into this, but when you talk about a quote unquote market in economics, there's two components of that. There is price and then there's also quantity.
And so when most people or the media looks at crash, quote unquote, they look at only the price, they don't look at the quantity of how many things are sold. So when you hear that housing is in a recession, it actually is. I think that it is. And it's possible for housing to be in a recession even without a prices declining, which is exactly what we're seeing, home prices or home sales volume, the total numbers of home sales have gone down about 50% since 2021. And so if you just think about the economic impact of that, it's just massive, right? Like obviously for people in your industry, Avery, real estate agents or loan officers, property managers, but it also just impacts the rest of the economy too. It's estimated that housing makes up about 16% of all GDP. And so if you think about how this translates just into every single part of the economy, it is really dragging a lot of parts of the US economy. And so I do think we've seen the bottom of it is my hope. We're starting to see, towards the last couple of weeks of 2023, things starting to move in a better direction. And I expect 24 will be better in terms of home sales volume. But we've got a long way to go to get back to a normal, healthy housing market. And my gut is that we're not going to get all the way back in the coming year, all the way.
[00:23:32] Speaker A: Back to 22, because that was not healthy either. Right.
Back to healthy in general, I suppose, yeah.
[00:23:41] Speaker B: Existing home sales, I think, average over the last couple of decades is usually somewhere around 5 million in a year and five and a half million in some years, but we are now below 4 million. So we would need to get up 30% to get back to pre pandemic levels, which is, I think, what would be normal. So somewhere between five and five and a half million.
[00:24:08] Speaker A: And to put us at 2020, 2021, that would be like another. Like 60% from where we're at right now, right?
[00:24:15] Speaker B: Yeah, exactly.
They peaked in 2021 at about 6.6 million. So, yeah, that's 60% higher than it is right now.
[00:24:26] Speaker A: Yeah.
[00:24:27] Speaker B: So I don't think we're getting back there, nor does it need to for the housing market to get healthy. But if we could get back to the average of between 2016 and 2020, for example, that would probably look a lot more normal to most people.
[00:24:42] Speaker A: I've seen a lot of that as perspective, too, though, especially even with, like, vendors, because again, as a landlord, I'm constantly calling people to replace siding and fix windows and such, and the perspective is not quite there for them yet. They're still kind of living on that gravy train mentality where screw you. If you don't hire me, there's 16 other guys right behind you. But really, truth is, they're not anymore. The 16 guys aren't behind me anymore. So I think there's a little bit of perspective there that we're waiting for. Just the. I don't mean to pick on my vendors and contractors. I love them. No, I think we need this thing to kind of shake out.
It's not enough time in between the craziness and what it is now.
[00:25:30] Speaker C: Plenty of time.
[00:25:31] Speaker A: Well, it's not for me, because when I'm dealing with these people, they don't realize that the gravy train has left town. And I'm just like, dude, you can't charge me $10,000 to do that dumb little job like you could two years ago.
[00:25:45] Speaker B: Do you think they're just making less money right now and just kind of accepting that until they're forced to lower.
[00:25:53] Speaker A: Their prices, I think they haven't gotten the memo yet. And it's still like with the vendors anyway. But I think it's coming. It's starting to get there where they're answering their phone a little bit more, which is cool again, that's what I do on a day to day basis. It's hard to find people to do stuff for you. So that was a big downside of 20 and 21 for me, was you couldn't get anybody to do anything at all. And now I'm finally starting to see that come around, which is very. I can breathe again. It's really nice. But anyway, let me ask you about that 5% number on the gross rents. 23. Do you have any recollection of what it was predicted to be before 23 started?
[00:26:36] Speaker B: I don't. I think most people were expecting it to be maybe even be a little bit higher. I personally thought it might be a little bit lower.
I thought maybe like 3%, but I think there has been what I would call a pull forward, basically meaning that rents grew in the span of maybe two years and what they would normally do in five years. And so I do think even if we had 5% rent this coming year, that rent is going to remain around average or even below average for the next few years because it just went so high so fast. I don't necessarily think it's going to go down. Rent is very sticky. Even in periods when housing prices go down, rent rarely goes down, and so I don't think it's necessarily going to go down. But when I underwrite rental properties these days, I'm not assuming 5%. I'd rather assume two or 3%. If I'm wrong and it's higher, that's great.
[00:27:34] Speaker A: Avery, how do I justify that between the long terms and the short terms? Obviously, it's a completely different animal. It's almost like disposable income versus mandatory income.
Is there a correlation there between short term rents and long term rents?
[00:27:51] Speaker C: That's most certainly not a me question. That would be a Dave question.
[00:27:56] Speaker B: A correlation in terms of growth rates for the two of them?
[00:28:02] Speaker A: Well, in other words, long term rentals is a little bit easier to predict because it's a necessity, right?
[00:28:07] Speaker B: Right. Yes.
[00:28:08] Speaker A: Where does that come in with the short terms? I guess, for lack of a better way to put it. Funny money.
[00:28:15] Speaker B: Yeah. I think it is much harder to predict, and I'm not as knowledgeable about short term rental demand in long term rentals. There's this metric called household formation, or the total number of households. And that's a really reliable number for forecasting rent. And so we have something there where I think when you talk about short term rental data, it's kind of hard to aggregate those numbers because all the numbers come from either Airbnb or VRBO, and there's no reliable government or university level statistic that measures short term rental demand. And so it's just a little bit harder to measure.
And my guess is that because it's not a necessity. Like you said, short term rentals in my mind are much more closely related to the hospitality industry, like hotels, than they are to long term rentals, just in terms of how they perform in different economic climates.
And so that's kind of what I would look at. That's just a guess, though. I think if you started to look at hotel data and see how much people are traveling, that might be a better predictor of short term rental demand.
[00:29:34] Speaker C: I want to segue back into the real estate sales. Luke, you jerked the wheel from me.
[00:29:41] Speaker A: I'm sorry.
[00:29:43] Speaker B: Let's go back.
[00:29:44] Speaker A: Yeah.
[00:29:45] Speaker C: Okay. You're driving. Okay. Back to the sales. So many analysts up until three or four weeks ago were projecting that we wouldn't see close to a six and a half percent interest rate until, like, this time next year, the end of 2024. Now. And we kind of alluded to this earlier, but I wanted to touch on it again because the rhetoric being used in the media a lot of times and what the media is saying is often more important than what the rate actually is in terms of consumer behavior. And I think now that we're in, like, we've had our first little nugget of good news, the Fed says, okay, we're not raising anymore. We don't think we're probably going to drop some next year. And interest rates shot down, like almost a point and a half to a number that analysts predicted we wouldn't get to until the end of next year. So what do you think that that is going to do to the real estate sales market at the beginning of this year?
[00:30:46] Speaker B: Okay, great. I have so many questions. There are so many things to say about this one.
I just want to make sure everyone knows the Fed doesn't set mortgage rates. It's much more closely tied to the bond market, and the bond yields have dropped really dramatically, and that's brought down mortgage rates. I just want to caveat that just because the Fed might lower rates next year does not mean bond yields are going to stay low or will go lower, they could go higher, and there's actually a lot of logic that they might go higher. Usually bond yields and recession risk are inversely correlated, meaning they move in opposite directions. And so if people are feeling the economy is getting better, which is basically what the Fed is signaling, they're saying the economy is getting better and so we're willing to lower.
Sorry. They are saying that basically they feel more confident in the economy. And so when that happens, that usually means that investors want to take risk. They pull their money out of bonds, they put them elsewhere in the economy, and that pushes rates back up. So I think we don't know where rates are going to go just yet. My personal belief is that they will probably stay in the sixes for the most of next year, but they will probably be pretty volatile. So I just want to caveat that, because I know in the media, and especially on social media with influencers, everyone's like, rates are going down. They're going to continue going down. See, now is a great time to buy. I'm not saying it's not, but it's not guaranteed. So the second thing is what happens if rates stay lower?
The obvious answer is that demand comes back to the market. People are going to want to buy houses and that is going to increase a lot of activity and competition in the market. To me, the million dollar question about the housing market in 2024 is if rates stay low, does it bring more supply and inventory back to the market? Because when rates went up, everyone was like, yeah, it's going to pull demand out of the market. That part was obvious and that's what happened. But I don't think most people, myself included, really thought about how that would impact supply. When rates went up, people just stopped selling their homes. And so now when rates go down, does that mean they're going to start selling their homes? We don't know. This is a very unprecedented thing. I hope so, because that would be the best thing for the market. Like if we saw an increase in demand and an increase in supply. When that happens, prices can stay relatively stable. They'll probably go up a little bit and we'd see more volume. And to me, that's a healthy housing market. And so I'm hoping that's what happens. But I do think there is this chance that demand goes up and people still don't want to sell their homes. And we're going to get back into where we were middle of 2022 when there was a lot of competition for homes and prices are starting to go back up.
[00:33:32] Speaker C: Yeah, I agree with that. And I've made that point a few times. And I've had people counter me with, well, if a lot of people start selling their homes, then that will flood the market with supply. But what they don't consider is that the majority of people who are going to list a home are not listing it right now because they're about to become a buyer. So a home seller in most cases, is a net zero to the market because they then become a buyer. So right now, again, according to Wall Street Journal, 82% of mortgages are below 5%, 91% are below 6%. So it's not worth it to people to list right now when they've got a mortgage at, let's say, five. But if the rates get down to six, they might be more apt to list because it's a smaller jump from five to six. So I kind of lean towards what you're saying is that what we'll probably see is we will see a bunch of people listing, and they're probably going to become buyers after that, which is why they're not listing now. So I don't really see that helping supply a whole lot. It will help activity, but in terms of getting a little more of a surplus of supply, I don't know. Like Luke and I, for example, not to bust you out, Luke, on some of your apartment buildings, but we've got one apartment building that we want to sell, but at the number we would have to sell it for, for it to make sense to another investor. Right now, we're waiting for the rate.
[00:35:00] Speaker A: No, I mean, none of them do. None of them really. It'd be very hard pressed to have anything that was purchased in the last three years make sense right now, especially in the larger property space. But anyway, go ahead.
[00:35:13] Speaker B: Yeah, I think this idea of, quote unquote, flooding the market with supply, when does that happen? That just doesn't happen. It's not like everyone. Demand can come back into the market quickly. In my mind, there are probably a lot of people who are waiting on the sidelines. I don't think there are, like all the. Selling a home is like a pretty big decision for people to make, and I just don't think it happens all that quickly. I think what we'll see is a gradual increase in supply, which is good. The only time there's a flood of inventory is when there's forced selling, when people can't make their mortgage payments like there was in. In 2008, but for many reasons, which we don't need to get into if you want to, we can, but for many reasons, we're in a very different situation than we were then. And so I think it's likely that there's going to be this combination of things, right? On one hand, we're going to see rates come down and that's going to make it more appealing to sell. And on the other hand, people just get used to it. At a certain point, you might wait a year to sell your home, but if you want to sell your home, you're just going to do it. Luke, in a year, you're going to not even remember that you used to pay less than $30 for shampoo. You're just going to be doing that and you're not even going to notice.
[00:36:27] Speaker A: That was my point exactly.
[00:36:29] Speaker B: And so I think at a certain point, people just move on. Maybe not investors because you're in it for dollars and cents, but home sellers. At a certain point, you just get on with your life. And I think that's going to happen. It might take a little while, but I think that's why that doesn't happen in a flood. Like it just happens slowly. And that's why the market is probably not going to magically get better, even if rates drop another 50 or 100 basis points.
[00:36:58] Speaker A: Go ahead.
[00:36:59] Speaker C: I was really trying to beat you to open.
Would you say as an investor then that now would be a good time or not so good of a time to go ahead and maybe try and buy a couple of things before things go crazy? Or are we waiting till rates go down? Or is there really even a best answer to that question?
[00:37:19] Speaker B: I mean, I always tell people not to time the market, but I am going to try and time the market myself. I actually think right now, the next two or three months might be like a nice little window because you see lower competition right now, especially in the winter. The couple of markets I'm looking in, there's still price cuts, there's still negotiation. I think the combination of rate down a little bit when we hit the normal spring selling season and buying season, I think it's going to pick up in terms of competition. I don't necessarily know yet if prices are going to explode. I think there's a chance not explode. I think there's a chance that they grow pretty significantly next year. But that's not why I'm doing it. I'm doing it because I think right now might be a little reprieve from all the competition that there might be for the rest of the year if rates stay in the mid sixes.
[00:38:13] Speaker A: That'S.
[00:38:13] Speaker C: What I was hoping you would say.
[00:38:16] Speaker B: I will tell you, I am trying to buy stuff in the next couple months.
[00:38:19] Speaker C: Yeah, tell Luke that I'm trying to buy stuff, too, but he keeps cock locking me.
[00:38:23] Speaker A: No, I'm trying to buy.
I made two offers yesterday, but they're not landing. Not the same things you want me to offer on, but.
[00:38:34] Speaker B: Did you get them?
[00:38:35] Speaker A: I did not. No, I've got one. I got one that's been killing me. I've been going back and forth with this seller three or four times now. I thought it was a no brainer. Yesterday, her agent was like, just give her this number and she'll take it. And we sent her that number and she wanted another 20 grand. It's a little three bedroom, long term rental. She wanted another 20 over that. I'm like, that's the number you told me to offer.
[00:38:59] Speaker B: Oh, man. Yeah. This is just a stalemate right now. It's exactly what.
But I think it's like right now there still are some sellers who are willing to negotiate, but if you start to see that competition pick up, they're not going to negotiate anymore. So I think.
I don't know, I'm just guessing, but that is what I'm doing with my money, I'll tell you that.
[00:39:23] Speaker A: Yeah. I hope things kind of. Just kind of chill for a minute. I'm kind of cool with the way things are right now. Yes. Let's bring it down a percentage or two on the interest rate.
And then what about these people that have under 3% interest rates? We basically took them out of the market altogether. They're never going to sell.
[00:39:39] Speaker B: They're going to be gone forever.
[00:39:40] Speaker A: Yeah.
[00:39:40] Speaker B: You know the average right now, avery, you just gave some stats about how many people are under five and 6%. It's crazy. But the average is three and a half percent. So you think about 50% of the market has a mortgage of three and a half percent or lower. That's just, well, not 50% of all homes. 50% of all homes that have a mortgage. So that's like 35% of the market. But still, that's crazy. Like a third of the market is just going to be very tempted to stay in their house forever, and they have tons of equity. So I don't have any data support. This is just a theory that I just think people are going to start refinancing once rates go down, or doing, probably taking a HELOC, actually, so they can keep their low mortgage rate, get a HELOC and renovate their home to the home that they want, rather than moving.
[00:40:27] Speaker A: There was a period of time where three and a half was normal. And now, looking back on it, even though it was really, in the grand scheme of things, it was yesterday, it's, like, crazy to think about that. And so that's my thing, is it's too much shock to the system too many different times.
Avery, what does 24 look like in the world of real estate sales?
[00:40:49] Speaker C: And again, I'm just a real estate agent, and this is just my two cent, 1.3 cents is we see an increase in home sales every March. March is always huge. That's for closings, which means we start to see a lot more buyer activity. Start in January, and then they start to close in March. We see that every year. Everybody knows buying in the spring is like the typical high season of buying. It's also a really good time to buy. It's a really good time to close on a short term rental in January or February, because your first mortgage payment, if you close in January, is not going to be due until March 1. And unless you're buying in, like, a Colorado type ski market, most short term rental markets will start hitting their high season in March. So you have the shortest amount of time between closing date and actually starting to make good money.
I think that's the best time of year to close.
We typically start seeing more activity around then. I think we've got a little bit more kind of mixed in there. With the rates dropping as fast as they did to where they are now, to where I think that we'll probably see higher activity than normal starting in January. And then once we get past the holidays, everybody's concentrated both their time and attention and their money elsewhere until we're past the holidays. So I think that we're going to see a good pickup in the springtime. Hard to say how much, but I do agree with you, Dave, that, again, trying to time the markets like trying to catch a falling knife. But right now, I do think there's still that lack of competition that gives you the ability to maybe get a better deal negotiation. Like, I know as soon as I saw those interest rates back in the mid sixes, I texted my agent in this market that Luke's trying to not let me buy in. And I was like, hey, find me a deal before everybody else jumps back in.
[00:42:45] Speaker A: Don't tell Luke.
[00:42:47] Speaker C: I'm trying to just get a really good one and just present him with it and be like, we have to buy this bike.
[00:42:51] Speaker A: I already closed it here's the address. Take care.
[00:42:56] Speaker B: Here are the keys.
[00:43:01] Speaker C: I think we are going to see some back to multiple offer situations, at least for a while.
I think it's going to take interest rates going down a little bit further to get there, and I don't think that's going to happen overnight like this last point and a half did. But I think that as things continue to trend down, we're going to see more multiple offer situations. Again, not like it was in 2022, but obviously significantly more than like now.
[00:43:28] Speaker A: All right.
On the rent side of things, I'm optimistic. I'm going to go ahead, put all my short term rentals. The headline on all my listings for the next month is going to be $30 shampoo special, and I'm going to keep my prices.
[00:43:44] Speaker C: You've always spent that much on shampoo, though, even when shampoo is like $2.
[00:43:48] Speaker A: This was cheap shampoo. I was blown away. I thought it was a typo. But either way, if shampoo is $30 and my rents are looking pretty good, I think, for 2024. And I've had no problems so far getting a few bookings coming in. So I'm happy across the board as far as rents are concerned. But, Dave, anything else on the way out and how do we find.
Oh, thank you so much.
[00:44:14] Speaker B: I appreciate it. Appreciate you having me. You can always find me on instagram where I'm at the data deli, or I do have a podcast where I talk about market data called on the market.
[00:44:25] Speaker A: Fantastic podcast. If you like numbers, spreadsheets, Dave's your guy, and on the market is a wonderful place to hang out. And of course, Avery's got a podcast, the short term show. And Avery, anything you want to say on the way out the door?
[00:44:43] Speaker C: Everyone, please email Luke and tell him to let me buy this thing that I keep being cryptic about.
[00:44:50] Speaker A: Yeah, at the shorttermshop.com. All right, well, listen, you guys are awesome. I appreciate your time. Happy renting 2024, and don't overthink it. It's.
