
Redfin: Vacation real-estate ‘toast’ as Airbnb owners rush to offload homes - pseudolus
https://www.marketwatch.com/story/vacation-real-estate-markets-are-toast-because-of-the-pandemic-as-airbnb-owners-rush-to-offload-their-homes-redfin-ceo-says-2020-05-11?mod=home-page
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k3oni
I'm really not expecting to see a significant drop in home prices at least
until close to the end of the year. While some vacation rentals owners might
have listed their properties for sale they are doing it pricing those close to
the current market value based on other properties for sale in their
respective area. We're looking for a vacation home and i'm monitoring the
prices in a few areas pretty close, but i don't think we'll do anything until
the start of 2021.

Remember you need surplus to drive price down. Also keep in mind that the
foreclosure process is currently on hold, once this opens again we'll be able
to get a closer look at the impact all the closures had/have on the RE market.

~~~
xoxoy
I’m seeing 50 homes under $1M in San Francisco listed in last 30 days. That’s
much more in that price range than I recall seeing in a very long time

~~~
refurb
Listing prices can be a bit deceiving. Usually real estate agents play with
listing prices - to get a bidding war going, they'll price well below market
price. It's not unusual to see overbids of 20-30%.

~~~
greedo
That's what my agent claimed when setting our asking price. We sure didn't see
a bidding war. The benefits to the agent for a lower price is in conflict with
what the homeowner wants. For example, a $10K diff in sale price is $350 for
the listing agent, and $9650 for the homeowner. So of course agents will push
for low prices to get a quick sale.

Of course, there are many times that a seller wants a quick sale (moving etc).
But often it's in the seller's best interest to be a bit more patient and
price it at market.

~~~
jlbnjmn
Yup. Sold our house in January using Redfin. Best realtor we've dealt with and
saved 2%.

Also watch out for realtors saying you need upgrades and recommending
contractors. They likely are getting a kickback, and by boosting the listing
price their commission goes up. You end up with the same proceeds, IF it sells
as fast, and you had to front the upgrades.

The incentive structure for realtors is whack. At a minimum, the commissions
could be tiered instead of continuous.

~~~
poulsbohemian
I don't know your location, I am not a lawyer, this is not legal advice, YMMV,
but: In most locales, a kickback like you are describing is illegal and can be
reported to your state's real estate commission. If you believe that your
agent is acting in bad faith, you should at least find a different agent if
not report them.

In many cases, smart upgrades can yield significant returns. Not all agents
who recommend upgrades are trying to con you, many are providing market-aware
prudent advise to help you maximize your return.

As an agent, I think it is good that tech and other competitive forces are
entering the field. That said, commissions often get pointed to as a
"problem." Here's the deal: If you believe your house will sell within a range
of say, +/\- $20K, then the agent's job is to try to get you to the top of
that range. 2% in my market, for an average house works out to about $6K. If I
can get you an extra $10K+ that you wouldn't have gotten by FSBO or similar,
that's where I'm adding value as an agent and that's why commissions exist.

~~~
jlbnjmn
Commissions are a major reason why the market lacks liquidity. When someone
buys a house, they're immediately 6% below market value, just from
commissions.

To each their own.

Redfin was a fantastic experience for us. The advice was rational and unbiased
(they get paid off of reviews, not commissions, if I recall my research
correctly).

And the house sold, which is wonderful.

Also, kickbacks may be illegal, but that doesn't mean they're uncommon or that
the laws would be enforced.

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ashtonkem
I live in an area with a large number of AirBnBs, specifically a beach town
near Los Angeles. Me and a few friends were hoping to see a significant drop
in home prices due to AirBnB landlords being forced the liquidate under
financial duress.

Obviously we didn’t think this would undo decades of disastrous housing
policy, but the hope is that some units would cross into striking range for
those of us with good jobs. Alas, the price barely moved in my area, much to
my surprise and frustration.

~~~
louiswilbrink
Just want to offer perspective from the investor side: I own just one Airbnb
in a hot market (downtown, hip neighborhood) and even though bookings were
cancelled in April, they’re building back up for May and summer months. It was
scary for sure for a span of several weeks, but there were always other
contingencies before liquidating (like converting it to a long term rental).

Even if I went along with the panic, it would take probably three months to go
through with any transaction that would throw a desirable property onto the
market. The demand is still so strong that the low price would likely chum the
waters and competitive bidding would drive the price up.

I think these Airbnb liquidation sale headlines are being sensational and end
up wasting buyers time.

~~~
maximente
you're almost certainly not in a vacation hotspot. in FL, many of the coastal
counties have banned short term airbnb style renting indefinitely. miami dade
and broward counties in FL are still uber locked down and won't even be
considered for partial reopening until May 18.

~~~
AshleyGrant
Short term rentals/vacation rentals are banned at the state level by the
Governor in FL.

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JMTQp8lwXL
The article buries the lede:

> Employers that were really stuck on whether to let people work from home
> have gotten completely unstuck. And if you can work for Goldman Sachs, but
> not in New York, if you can work for Amazon, but not in Seattle, well, why
> would you pay the premium?

Vacation rentals impact prices, but are a mere slice of the total market. If
tastes and preferences shift away from expensive cities due to remote-work
friendly policies, that will have a profound shift on not only housing, but
automobiles, gas, etc. People certainly enjoy living in cities, but how many
people live in cities exclusively for the physically proximate job access they
provide? Time will tell.

~~~
duxup
I wonder if this concept really sticks...

I worked for a company that was acquired that was based in Minnesota. The
acquiring company absolutely could not find warm bodies in the bay area to do
... tech support. So they finally asked if the bumpkins in Minnesota could
help out.

I traveled out there and everyone was very nice but I had things explained to
me like I hadn't used a computer before, or couldn't follow a simple process.
One of the directors asked me "What do people in Minnesota do for work?" I
told him "Same as around here.", he found that hard to believe and told me
about how is team were all high performers in college with fancy degrees and
such.

Anyway a month later my team is out performing the valley team with higher
customer service scores (funny that if you actually call your customers they
like it, you can solve problems faster...) and so on. All with a smaller team
and at ~2/3rds the price (possibly less).

I mean it was just tech support, on some fairly high end equipment. But still
it was not rocket science.

A few years later to save costs ... they skip Minnesota try disastrously to
offshore to India.

Then after the company is acquired again they take the opportunity to axe
everyone in MN, and again ... can't find anyone to work in the bay...

I just don't know, these choices seem sort of institutionalized / culture
oriented.

~~~
sangnoir
> A few years later to save costs ... they skip Minnesota try disastrously to
> offshore to India.

That's funny, because I was following along thinking your point was geographic
region doesn't predict performance. Do _you_ find it hard to believe it's
possible to have an Indian team with who were high performers in college with
fancy degrees and such?

~~~
duxup
Generally, I don't see any insurmountable impediment to outsourcing to India.
I don't know of any reason they couldn't have outsourced successfully.

The experience I had there was a disaster... because of the company they chose
to use to outsource just couldn't keep capable people on staff for more than a
month or two. The folks who stayed, were just terrible / couldn't troubleshoot
their way out of a box and IMO had some perverse incentives. I suspect there
was an incentive revolving around "closed cases" and like all metrics that got
abused and it was costly for everyone.

My email was filled with "please assign this case to duxup" cases that were in
the hands of our outsource partners (and sometimes the bay area..) because
folks recognized the case wasn't going anywhere fast.

The company even tried hiring folks locally at an office they had but again
they couldn't keep anyone (probably again paying poorly) who was good very
long.

I don't know the job market in India (then or now) but I suspect they simply
weren't paying well / had a very poor partner outsourcing company.

I've had some visibility to various outsourcing efforts and every time it
seems that the companies they partner with just don't provide much in the way
of stable talent. I would assume it is possible to find a company who does,
but I just haven't had that experience. I suspect that is more random chance
than anything else.

Personally I suspect that most companies just decide, "We're outsourcing and
we're going to save X amount!" and without knowing or caring they priced their
way into poorly done outsourcing ... and only that. Interesting enough, I
heard we hadn't saved much of any money long term with the outsourcing effort.
Largely hiring just didn't keep up with sales and any savings in support costs
there were attributed to outsourced support.

It was somewhat amusing as many of the Bay area staff were from India (they
weren't H1Bs, they were citizens), and man nobody hated the the outsourced
support more than those guys ;)

~~~
sangnoir
Thanks for clarifying. I was taken aback since your terse summary of the
failure gave me the impression that the failure was _because_ they outsourced
to India, which runs counter to what I believed was your narrative core on the
subject of geographic exceptionalism.

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TomMckenny
>...the bifurcation of the American dream. It used to be that working-class
folks could reasonably aspire to buy a house. ...So unemployment is going to
be bad for one part of America...

Housing as institutional investment and institutional land speculation is a
condensed example of why stocks can rise during an economic catastrophe, why
housing will become yet more unaffordable and what drives increasing
inequality between wage earners and asset owners.

Redfin's stock has been part of the record breaking rally during the pandemic
because the drop in housing prices that would have kept them somewhat in sync
with a drop in income will instead be at least partially absorbed by Redfin
and other speculators and so make housing even more unaffordable. As we know,
the model is to offer a desperate seller a low price then keep the unit empty
until a new higher price is met. So a unit stays empty longer than necessary,
prices are kept high by a seller that can afford to do so (ie Redfin) and
profit is made from widespread economic hardship.

In particular the housing crisis is not due to bifurcation between wage
earners, it's a simple perpetual shift upward in housing prices that affects
everyone who works for a living. Portraying it as bifurcation obfuscates the
cause of the problem by creating a conflict between wage earners with
different incomes while portraying the speculator's actions a inevitable,
natural and harmless. But housing is not expensive because some people earn
what they are worth, it is expensive because housing is used as investment.

~~~
joshstrange
> Redfin's stock has been part of the record breaking rally during the
> pandemic and is doing well because of widespread economic hardship.

Their stock has been rising due to the Fed buying up a ton of assets like
these. Their stock price does not reflect "reality".

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jcomis
In my city (Denver) where a lot of the Airbnb usage is event based (sports,
conventions, concerts) I've noticed a rash of fully furnished rentals come on
the market at just under market rates. These are clearly all former AirBnbs.

People are definitely having cashflow issues and I'm guessing many got their
units through a ton of leverage and are now in a very bad spot.

~~~
ganstyles
Completely anecdotally, we were staying in an Airbnb for a week before
shifting to a longer term rental. This was right when things were shutting
down. Our Airbnb host told us that all their renters were cancelling for all
their properties. They offered for us to stay essentially as long as we wanted
for something like 50% of our rate. We unfortunately couldn't take advantage
of that because of the aforementioned prior plans, but it was an interesting
data point and would have saved a bunch.

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apocalyptic0n3
Anecdotal, but I've been monitoring homes on Zillow for a while now hoping to
find my first purchase. There's usually 2-3 dozen news ones within 5 miles of
my current location that were listed in the last 14 days. I checked this
morning and there are 200+, and that was after filtering out new
constructions, apartments, and condos which I normally I don't do. I was a
little shocked at how many there were. No change in prices, though. I'm
assuming this is a bunch of owners wanting to sell before the market falls and
their home is worth less.

~~~
thehappypm
In my region (Northeast US), nobody even thinks of selling until May, and
summer is when the vast majority of homes hit the market.

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tony_cannistra
The human v. algorithm power dynamic here is pretty uneven. The prospect of
getting an instant offer from these companies is probably a net-positive for
folks who are facing serious financial hardship (e.g. from lost rental income
that was paying their mortgage), but the same system that enables it also
really encourages unethical algorithmic low-balling.

Will a Redfin/Zillow data scientist use new coronavirus cases / county in
their pricing model? Should they?

~~~
Analemma_
People who rent out Airbnbs which aren’t their primary residence, especially
if they took out a bunch of debt for it, are squeezing the housing supply and
driving up costs, so I’m not gonna shed too many tears if they get screwed by
the algorithm. Let them eat a huge loss as a warning to others so they’re wary
to try it again.

~~~
jhenkens
We need minimum owner-occupancy rules for vacation rentals.

~~~
mperham
Many locales already have them, including my city. Airbnbs are only legal if
the owner lives on the property. This ensures Mom and Pop only, not over-
leveraged speculators.

~~~
jfk13
Does it ensure that in practice, or only in theory?

~~~
ashtonkem
Also, AirBnB has put a lot of effort into dodging local regulations.

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Pfhreak
What is iBuying? It's not really explained in the article. I'm guessing it's
where redfin acts as the agent and facilitates the sales online, but I'm not
sure.

~~~
empath75
Redfin buys and flips houses themselves.

~~~
JKCalhoun
Interesting, competing with their own customers.

~~~
tomjakubowski
Not too different from what Amazon does: use their own customers' data to
crush them in competition.

~~~
product50
This is exactly similar to what all retailers do.

------
jedberg
It's too early for prices to reflect economic realities yet, especially since
foreclosures are on hold and car auctions are on hold too.

Car prices and house prices haven't moved yet. House prices usually lag a bit
behind because people have to miss a few payments and get over the emotional
hurdles of losing their house before they start selling.

But it will come, unless we see a V shaped recovery, which is still possible
with the money the Fed is printing.

------
code4tee
Many real estate investments are highly leveraged—-you need people renting
your property to pay back the loan you used to buy the property.

If a family owns a vacation property outright and they’re going to miss out on
some extra income then things are annoying but not terrible.

Those that bought in a leveraged scenario (and worse did so on multiple
properties) are heading into a really bad situation and thus it’s
understandable they’ll want to offload the property ASAP.

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empath75
Given that my company is sort of waving in the direction of allowing permanent
full time remote, buying a beach house at a discount sounds pretty appealing.

~~~
RyJones
Make sure you can get good, stable internet. I’ve WFH for over five years, and
good internet really helps.

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chrstphrhrt
Hoarding shelter should be outlawed anyway. Or hotel licenses should be
required with massive fines for evasion. Get a real job "hosts" (a disturbing
doublespeak term for parasite).

The original evolution of couch surfing that Airbnb started with was still
cool and I like to be able to let my apartment when out of town. It's the rent
seeking behaviour that distorts the housing market.

~~~
biztos
I’m not downvoting, but you do realize that subletting while out of town is
both rent-seeking and distorting the _hotel_ market, right?

~~~
chrstphrhrt
If it's your primary residence that you live in for e.g. 80% of the year and
you swap with other primary residences or actually stay in normal hotels when
travelling, I can't see any distortion there.

Not trying to apologize for hosts or hotels in particular, I just feel like
primary residence swapping is pretty harmless. Also, if hotel licenses are
required, how is adding more hotels distorting the hotel market other than
adding a tiny amount of fair and regulated competition?

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subsubzero
I don't know about vacation towns but given expensive urban cites I expect to
see large drops in prices. Given covid-19 and its mindset it no longer makes
sense to live in densely crowded expensive metro areas anymore. With large
tech companies finally waking up to the fact that remote work actually works
expect to see a huge exodus of people from these expensive regions. With all
the restaurants and museums closed and really no outside space they don't have
much to offer except high taxes and crowds. Also if a engineer can get roughly
the same pay but work where they can buy a house instead of have 3 roommates
in a 5k a month apt. which would they choose?

~~~
smileysteve
From my experience, UberEats and Instacart are two pandemic essentials that
most city dwellers aren't ready for in a rural environment.

~~~
ghaff
>pandemic essentials

Not really. Yes, if someone isn't in a dense urban environment, they're going
to need to cook a lot of their meals. But, unless you're in a _really_ rural
location, there are supermarkets and at least some restaurants. In a lot of
cases you can pickup orders at the door even if you can't get delivery.

A lot of people seem to think you're either in Manhattan or in the wilds of
Idaho somewhere. There are plenty of places that are in orbit of a major city
that aren't actually all that congested.

~~~
smileysteve
I've spent much of my stay at home where the nearest grocery store that had
order ahead was 27 miles away and had a 5 day order ahead time (which was more
or less expected).

Yes, a handful of restaurants have pickup orders but there are ~4 within a ~5
mile range, and they have the best food without going that 27 miles.

It's my perception (in part from the long order ahead times) that grocery and
food delivery have gone up in areas that offer them and that modern urbanists
that regularly cook at home (or even go to the grocery store only once a week)
are a minority.

~~~
ghaff
Oh, yes, I think delivery has gone up. Personally, I haven't used it (for
food). I don't have decent restaurant delivery options--for my tastes. And the
stock situation with supermarkets is sufficiently bad that I'd rather go
myself and wing substitutions.

I have a couple nearby grocery pickup options (an hour outside a major city)
but going into a store early on a weekday doesn't feel like a big problem
where I live. Opinions may differ of course.

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billpg
If you'll excuse me, I'll be purchasing some tiny violins.

------
tinyhouse
Vacation rentals still have demand. Many people would rather spend the
lockdown in a nice house in nature somewhere than in their urban place. The
problem is that at least in the US many states issues a ban on non-essential
rentals, so they are illegal currently in many places. Once that's lifted many
of these places would be fully booked. The rental places in urban areas that
rely on tourists visiting cities are a different story.

~~~
ghaff
I can easily see a scenario where, say, extended rentals on beach houses on
Cape Cod are especially popular this summer given:

\- A lot of the usual urban concerts etc. will probably be canceled and even
casual eating/drinking/walking/shopping will be more awkward.

\- International travel will be mostly a no-go.

\- Flying in general will be more awkward

\- Even a driving vacation won't be as low friction as usual

So maybe better to rent a house somewhere nice and hang out with the family.

------
jojo2000
> Despite the coronavirus outbreak causing a downturn in home sales and
> listing activity through March and April, Redfin managed to beat
> expectations with its first quarter earnings as the company posted a net
> loss of $60 million. A year ago, Redfin had reported a larger net loss of
> $67 million, for comparison.

That's a weird way of "beating expectations"

------
purplezooey
The article appears to have been pulled. In any case it seems unlikely that
vacation rentals are "toast". The drivers of their expansion, mainly our lack
of ability to build anything in sufficient quantities nearly everywhere,
aren't going away.

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3fe9a03ccd14ca5
As someone looking for such a home, I definitely haven’t seen the market
soften nearly close to what the doomsayers are predicting. Speaking with some
owners, I think many of them are instead turning it into a long term rental
for a year or more.

------
_curious_
As someone in a STR coastal hotspot, I generally agree with the sentiment here
that it's too early for the average observer to ascertain a market
correction...for vacation/STR areas, it's the rental market change that will
precede the housing. (for example, many properties tyically churning
$5-$20k/mo during peak season via STR are now renting M2M @75%ish off - and
this is good for local communities IMO).

Online enablers like Redfin have perch from which to observe the market like
no-other, hence the reason they can buy and sell in house with competitive
technological advantage.

That said, I didn't see any data from the article to suggest what the CEO is
purporting "home-buying demand is almost back to pre-pandemic levels." \- so
going to call BS on that full stop; he has every reason to say this esp.
without a "reporter" who will challenge the statement or followup...read
between the lines.

Also, these players restarting their own in-house buying programs are simply
able to tweak their algorithms to low-ball and who can blame them? Does not
indicate a healthy/positive market ahead either...just that they are going be
hunting for deals via automated offers...again who can blame them? (Just don't
interpret that move as meaning much of anything at this time).

TLDR; this is a marketing piece - give me evidence to support a claim or GTFO.

~~~
jiveturkey
> "home-buying demand is almost back to pre-pandemic levels."

yeah that's clearly fraudulent marketing.

> Online enablers like Redfin have perch from which to observe the market like
> no-other

eh? Not at all. What data do they have that any MLS subscriber doesn't have?

~~~
biztos
> What data do they have that any MLS subscriber doesn't have?

Wouldn’t they have some insight into what people _want_ to buy?

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prepperpotts
although i'm a home owner as of fairly recently, this feels like a bit of a
necessary correction. people owning multiple homes drives up prices for
everyone else.

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rb808
I'd think with new lower mortgage rates vacation real estate will rise in
value.

Sure, some people get squeezed in the short term, but in a year or two this
will probably be all over and people will be desperate for their vacation.

Plus baby boomers are still retiring and more people are escaping big cities.

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rednerrus
deeperpockets about to be shallowerpockets...

