New data underscores a 14-month trend of second-home demand remaining at least 30% below pre-pandemic levels, largely due to high housing costs and limited inventory.
Happy hump day! And we continue to discuss the housing market and mortgages.
There was a 47% drop in mortgage-rate locks (a lock-in fixes an interest rate between the offer and the closing) for second homes in the U.S. in August compared to pre-pandemic levels, according to new data from real estate listing site Redfin. The data underscores a 14-month trend of second-home demand remaining at least 30% below pre-pandemic levels, largely due to high housing costs and limited inventory. In February, rate locks for second homes reached a seven-year low, plummeting to 52% below pre-pandemic levels. Year-over-year, demand for second homes has also dipped by 19%, surpassing the 14% decline for primary homes.
The numbers mean people aren’t buying as many investment properties as they were during the post pandemic rush.
What’s worse is that the confidence of U.S. homebuilders is also declining — for the first time in seven months due to persistently high mortgage rates. According to more numbers from the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence in the single-family housing market dropped 5 points in September to a reading of 45 out of 100. Builders are hence offering more incentives to buyers like 32% reductions in prices in September; in August the discounts were about 25%.
What does this mean? I think you know what it means.
“We are experiencing some type of recession, either a semi or quasi recession,” said Christopher Ledwidge, executive vice president of The Lender, a wholesale mortgage company. “We had a shelter in place during Covid, and then a bunch of money flooded in, which left people with extendable cash. This was around the time when STR was booming and now everything has gone the other direction.”
Ledwidge added, “People are at the tailend of Covid money and deferments on debt. So the moratorium on debt payment is over, at a time when the cost of living is higher.”
Short-term rentals today cost more money to operate and consumers have less money to spend. This is nowhere more apparent than in California where, despite falling population numbers, homes are unaffordable and the housing shortage is rampant.
HomeToGo Appoints Chief Investment Officer
German vacation rental marketplace HomeToGo appointed Bodo Thielmann as its chief investment director in a newly created position. In his most previous role, Thielmann was the CEO of Destination Solutions (HRS Group), a key HomeToGo partner, and has previously been the CFO at Oyo Vacation Homes. Thielmann will spearhead HomeToGo’s efforts to acquire, integrate, and expand profitable businesses. The company aims to utilize its substantial cash reserves to drive both organic and inorganic growth.
Junk Fee Crackdown in California
California lawmakers have passed two bills aimed at increasing transparency regarding fees in the state’s hospitality industry. The bills, currently on Governor Gavin Newsom’s desk awaiting action, could impact the way hotels and short-term rentals disclose additional charges, like resort and housekeeping fees.
Senate Bill 537, which would be effective July 1, 2024, would require that lodging businesses in California include all fees (except government taxes) in their room rates up-front. It also mandates that online platforms display all mandatory fees during the initial search. Senate Bill 478, set to become effective by mid-2024, would make it unlawful for California businesses to advertise prices that exclude mandatory fees, with some exceptions. Governor Newsom has until October 14 to sign, veto, or let the bills pass into law by default.
Airbnb, Booking.com and Vrbo Deal with Greek Tax Authorities
Greece’s Independent Authority for Public Revenue (AADE) has taken steps to tackle tax evasion in short-term rental platforms by updating its cooperation protocol with platforms including Airbnb, Booking.com, and Vrbo, according to Greek local media reports.
During the 87th Thessaloniki International Fair this week representatives from these platforms signed revised memoranda of understandings with AADE Governor Giorgos Pitsilis. The updated agreements require short-term rental companies to include validation of property registration numbers, provide account holder details for identification and auditing purposes, report non-compliance by property managers, and furnish requested data as necessary.
These measures follow Prime Minister Kyriakos Mitsotakis’ announcement that income from Airbnb-style rentals will be subject to taxation from January 2024, particularly for operators managing three or more properties.
European Parliament Group Wants to Regulate Rentals to Fix Housing Crisis
The Progressive Alliance of Socialists and Democrats, a European parliamentary group, emphasizes the importance of regulating short-term rental booking platforms like Airbnb and Booking.com to address housing affordability. A proposed measure adopted by a parliamentary committee includes systems to register hosts, mandates that online platforms display host registration numbers and share host details with authorities, with the aim to enhance transparency in the European short-term rental market. The group contends that while these platforms have boosted tourism and economic growth in some underserved European areas, they have also contributed to the “touristification” of cities, impacting housing affordability and the quality of life.
Get breaking news, analysis and data from the week’s most important stories about short-term rentals, vacation rentals, housing, and real estate.
Have a confidential tip for Skift? Get in touch