2024 – Page 36

Why Investors are Leaving Airbnb for Coliving Rentals

by Adam Kolojejchick-Kotch
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Bridging the Gap Between Traditional Leases and Airbnb-Style Stays By Adam Kolojejchick-Kotch While Airbnb’s meteoric rise catalyzed the short-term rental revolution, the landscape has since shifted. Amidst challenges such as regulatory battles and neighborhood concerns, the once-alluring promise of effortless short-term profits faces headwinds. Frustrated hosts have voiced their dissatisfaction, prompting Airbnb CEO Brian Chesky to acknowledge that the platform is “fundamentally broken.” For Airbnb hosts in the U.S., the reality is more nuanced. With occupancy rates declining and the number of available listings surging, hosts are grappling with increased competition, forcing them to compete on price and quality. Top-tier hosts continue to thrive, while lower-tier, undifferentiated properties face more significant challenges. Most investors can no longer achieve the Airbnb dream unless they own properties with luxurious amenities and features or are in a high-traffic area where vacationers visit year-round. The Rise of Coliving Homes Amidst these challenges, a new trend has emerged: the rise of coliving rentals. Investors are pivoting to cater to a different demographic — low-income earners seeking housing solutions for a few months to a year, driven by the scarcity of affordable housing. Platforms like PadSplit have capitalized on this demand, offering affordable, furnished housing options that bridge the gap between traditional leases and Airbnb-style stays. While Airbnb caters to the desire for unique vacation experiences, PadSplit taps into the necessity of providing affordable housing solutions. The demand for affordable living spaces and low-cost rooms for rent is stronger than ever, and this demand is likely to continue increasing over time. Coliving rentals offer many advantages for investors: Steady Income // Longer lease durations provide more stable and reliable income streams. Investors can earn 2.5x more on a single-family home. Reduced Vacancy Rates // Coliving rentals often attract tenants with work-related needs, such as business travelers, interns, or contractors, ensuring consistent demand and lower vacancy rates. Airbnb’s occupancy typically hovers around 48%. Hosts on platforms like PadSplit have a higher occupancy rate of 85%. Lower Operational Costs // With longer stays, property management becomes much more streamlined. Compliance and Regulation // Coliving rentals often face fewer regulatory hurdles compared to Airbnbs. Reduced Management // PadSplit handles most management tasks, such as marketing, member screening, payment collection and 24/7 member support. The Surging Demand for Affordable Housing The United States requires at least 7 million additional affordable homes to meet the demands of low-income families. With thousands of individuals languishing on years-long waiting lists for housing vouchers in virtually every American city, governments alone cannot resolve this crisis. PadSplit aligns the incentives of local governments endeavoring to address this problem with millions of existing and prospective real estate entrepreneurs seeking strong, sustainable cash flows. While Airbnb swiftly amassed over 6 million listings for vacation rentals, increasing regulation of short-term rentals in major cities like New York and Dallas has nearly halved Airbnb host revenues. Potential new taxes on Airbnb in states like California further threaten profits. Turbulent Market Conditions = More Opportunities Turbulent market conditions weed out less serious investors and open up opportunities for those willing to capitalize while facing reduced competition. Despite economic uncertainties, the need for affordable housing remains a constant, unaffected by fluctuations in the economy, interest rates, or housing prices. Investors seeking an exit from underperforming short-term rental properties are finding coliving rentals to be an attractive solution. By converting their properties to coliving rentals, they can achieve higher net occupancy rates and improved profitability while serving the essential housing needs of their communities. The home-sharing revolution continues to evolve, with coliving rentals emerging as a viable and promising alternative for investors seeking stable, long-term profits in arapidly changing real estate landscape. Coliving Homes are the Best Exit Strategy While top hosts with hundreds of reviews on Airbnb continue to perform well, newer and underperforming hosts are looking for the exit as poor Airbnb reviews from hosts are becoming more commonplace. Coliving rentals through PadSplit is the best exit strategy, which is why we have seen a big spike in Airbnb hosts converting their properties to our platform. Of course, not all STR and vacation properties will make good coliving rental homes. The sweet spot is single-family properties in major metro areas with underutilized living space. On average, our hosts earn 2.5x more than traditional single-family rentals and 33% more than Airbnb. Coliving investments offer greater flexibility in terms of location, as individuals can pool their resources to acquire housing in areas that may be unaffordable for a single household. This flexibility extends to both neighborhoods with or without HOAs. In most metropolitan areas, the demand for affordable housing is high, particularly among essential workers employed within the city limits. However, rising rental costs have led to the displacement of these workers from urban centers. Coliving enables essential low-income earners to remain within the city boundaries while enjoying shorter commute times to their workplaces. A Rapid Conversion Process PadSplit’s rooms for rent offer a swift transition for property owners seeking to move away from Airbnb. The hassle-free conversion process is facilitated by the fact that all necessary furniture is already in place. In some cases, property owners can go live with their PadSplit in just a week. This ensures a seamless shift from one model to another without prolonged vacancies or logistical challenges. It is crucial for property owners to align their strategies with society’s prevailing needs. PadSplit not only addresses the pressing need for affordable housing but also offers a reliable exit strategy. PadSplit emerges as the smart choice for investors seeking sustainable and consistent returns in today’s competitive market.

States Pass ‘Anti-Squatter’ Legislation

by David Howard
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Legislation Passed with Overwhelming Bipartisan Support By David Howard As the supply of new housing has struggled to keep pace with demand over the past decade, single-family rental housing has come to play an increasingly important role for families in search of quality, well-located housing. And with the surge in interest rates over the last year pushing the cost of housing to record highs, single-family rental homes provide residents with an affordably priced housing option that, on average, is over $1,000 less per month than the cost of homeownership. Yet, the single-family rental housing market has also not been immune from the effects of the supply constraints impacting the broader housing market. According to the Joint Center for Housing Studies at Harvard University, the number of single-family rental homes nationwide has declined each year since 2016. This decline has partly been offset by a notable increase in the number of single-family homes built expressly as rental properties. Known as build-to-rent housing, this innovative homebuilding platform provides families with a new home lifestyle, complete with sought-after community amenities, with the convenience, flexibility, and affordability of leasing. Housing Availability In today’s supply-constrained housing market, additional development and investment in housing is essential. However, it is just as important to make sure the current stock of housing remains accessible and available, whether ‘for sale’ or ‘for rent.’ One of the most urgent concerns regarding housing availability is trespassing, often referred to as “squatting.” Regardless of the term, the end result is the same — the illegal occupation of one’s property. NRHC became involved with the issue of illegal occupation in earnest in the summer and fall of 2023 when a marked increase in the number of incoming complaints from members led us to take action. We received data on markets where incidents of trespassing occurred most often. Priority markets included Atlanta, Georgia, where data showed 1,200 homes were occupied as a result of trespassing; Dallas/Fort Worth, Texas with 475; and Orange County, Florida, with 125. Illegal occupation for NRHC is not a political issue and it is not an issue of housing fairness or equity. Illegal occupation is about criminal activity. It is about someone who has entered a home and is occupying that home without a legal right to do so. For the property’s legitimate owner, the issue is about property rights, but it is about so much more. There are serious public safety issues at play here — Who is in the home? What is the risk to others in the neighborhood? Also, there is a real concern about the availability of affordably priced housing. Every incident of illegal occupation means there is one less home available for a family in need of quality, single-family rental housing. Responding to Illegal Occupation Many states and jurisdictions across the country had, or have, no accommodating legal framework to allow law enforcement and the courts system to respond adequately to incidents of illegal occupation. Often, property owners are left on their own to try to remove illegal occupants from their homes. Law enforcement often must decide whether an incident of illegal occupation is a civil or criminal matter, or who has proper legal documentation to support their claim of occupation or ownership. Courts are often not able to schedule hearings in a timely fashion to remedy incidents of illegal occupation. All of this leads to inaction, frustration, and in many cases, financial hardship for legitimate property owners. Several states have recently passed legislation to address incidents of illegal occupation. Over the past several weeks, Governors in Georgia, Florida, and Alabama signed bills providing property owners with an assured legal pathway for reclaiming their homes from trespassers. Legislation in these states have several common provisions: » They codify the act of trespassing into law » They provide a time-certain process requiring owners and occupants to disclose legal documentation attesting to their claims » They include preventative measures to ensure owners and occupants are truthful in disclosing that documentation » They provide the courts and law enforcement with more efficient means to respond to claims of illegal occupation Importantly, legislation in all three states passed with overwhelming — in some cases, unanimous — bipartisan support.

COST OF HOME REPAIRS INCREASES BY 4.1% FROM Q1 2023

by Rick Sharga
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Slight Decline in Labor Costs Help Slow Overall Increase in Repairs By Rick Sharga, CJ Patrick Company The cost of home repairs and remodeling in the first quarter of 2024 continued to increase, rising by 0.59% from the prior quarter and just over 4% from the first quarter of 2023 according to the Q1 2024 Verisk Remodel Index. Costs once again set new highs for the past decade, rising over 61% from the first quarter of 2014. The Verisk Remodel Index tracks costs on 31 different categories of home repair, comprising over 10,000 line items ranging from appliances to windows. Data are compiled monthly in over 430 local market areas across the country. “Repair costs rose in each of the 31 categories of home repair that are included in our index, but the rate of increase continues to be slow down from the more rapid increases we had during and immediately after the COVID-19 pandemic,” said Greg Pyne, VP, Pricing for Verisk Property Estimating Solutions. “Labor costs appear to be coming down slightly as well, which has an impact on the overall cost of home repairs.” Quarterly costs rose in all 31 categories included in the report. The cost of framing was still slightly lower on an annual basis, and the only covered category that was not higher than in the first quarter of 2023. Framing was the only one of the six largest categories of expenditure to decline on an annual basis. The other four — cabinets, siding, paint, wood look flooring, and plumbing — all rose between 2.5% and 5.5% over the past 12 months. The cost of exterior doors rose the most compared to the last quarter, increasing by over 3.7%. Only two other categories had a quarterly increase of at least 1% — tile flooring at 1.55%, and interior home painting at 1.03%. East South Central Region Shows Highest Quarterly Increase All regions again experienced cost increases both quarterly and annually, but all of the regions reported quarterly increases of less than 1%. The East South Central Region saw costs rise by 0.72% compared to the fourth quarter of 2023, followed closely by the South Atlantic Region, where prices rose by 0.70%. The New England Region had the lowest quarterly increase at 0.51%, but the largest annual increase at 4.51%, slightly higher than the Middle Atlantic Region at 4.47% and the Mountain Region, where prices rose by 4.44%. The index has risen by 65.88% since its inception in January 2013, and the Mountain Region continued to have the highest overall cost increases over the period covered by the index, rising 70.92 points since the first quarter of 2014. The Mountain Region also has the highest increases over the past decade, with costs increasing by 64.74% since the first quarter of 2014. The Pacific Region (63.83%) and New England Region (62.81%) are the only two other regions that surpassed the national average of a 60.72% cost increase over that 10-year span. Northeastern States Have Both the Highest and Lowest Rates of Increase Delaware had the highest quarterly rate of increase in the country at 1.43%, the only state to surpass a 1% increase for the reporting period. Tennessee (0.90%), Florida (0.87%) and Montana (0.87%) barely missed that threshold. Other states with relatively high rates of quarterly increases included: » South Carolina (0.84%) » Mississippi (0.82%) » Michigan (0.79%) » New York (0.77%) » South Dakota (0.73%) » Wisconsin (0.72%) Rhode Island had the lowest rate of quarterly cost increases at 0.37%, followed by: » Colorado (0.38%) » Wyoming (0.38%) » Alaska (0.41%) » New Mexico (0.41%) » West Virginia (0.42%) » Oklahoma (0.42%) » Nevada (0.42%) » Washington DC (0.43%) » North Dakota (0.44%) For more information, please visit www.verisk.com or contact Rick Sharga at rick.sharga@cjpatrick.com. Verisk is a leading strategic data analytics and technology partner to the global insurance industry. It empowers clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, ESG and political issues. Through advanced data analytics, software, scientific research and deep industry knowledge, Verisk helps build global resilience for individuals, communities and businesses. For more information, please visit www.verisk.com.

Homeowner Equity Remains Elevated

by ATTOM Team
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…But Dips Downward Again in First Quarter By ATTOM Team ATTOM, a leading curator of land, property, and real estate data, released its first-quarter 2024 U.S. Home Equity & Underwater Report, which shows that 45.8% of mortgaged residential properties in the United States were considered equity-rich in the first quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values. The portion of mortgaged homes that were equity-rich in the first quarter of 2024 is down from 46.1% in the fourth quarter of 2023, marking the third straight quarterly decline. The latest figure also was down from 47.2% in the first quarter of 2023, hitting the lowest point in two years. At the same time, the report shows that the portion of mortgaged homes that were seriously underwater in the U.S. rose slightly in the first few months of 2024, from 2.6% to 2.7% of all residential mortgages. Seriously underwater mortgages are those with combined estimated balances of loans secured by properties that are at least 25% more than those properties’ estimated market values. “Homeowner balance sheets continue to benefit in a huge way from the boom times in the form of elevated equity that can be used to help finance all kinds of things, from home renovations to business startups. Still, the windfalls are starting to erode bit by bit amid mounting signs that the market is no longer so super-heated,” said Rob Barber, CEO for ATTOM. “It’s too early to make any broad statements about the market direction, especially coming off the typically slower Fall and Winter months. But amid the recent trends, this year’s Spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing.” The latest equity drop-offs emerged as the national median single-family home and condo value slipped 4% over the Winter and was up just a modest 3% year-over-year during the first quarter. When prices flatten out or drop, equity usually follows even as homeowners pay off mortgages. That’s because equity is based on mortgage debt as a portion of estimated property values. Heading into the Spring buying season, the market faces a mix of forces that could drive it back up or hold it steady. Those forces include a tight supply of homes for sale and a strong investment market but also mortgage interest rates that have climbed back above 7% for a 30-year loan on top of home prices that remain a financial stretch for average wage earners. Equity-rich share of mortgages declines quarterly in a majority of U.S. The portion of mortgages that were equity-rich decreased in 26 of the 50 U.S. states from the fourth quarter of 2023 to the first quarter of 2024, commonly by less than two percentage points. Measured annually, equity-rich levels dropped from the first quarter of 2023 to the same period this year in 25 states. The biggest quarterly declines came in the South regions, led by: » Kentucky (portion of mortgages homes considered equity-rich decreased from 35.4% in the fourth quarter of 2023 to 28.7% in the first quarter of 2024) » South Carolina (down from 42.4% to 4%) » Georgia (down from 46% to 43.7%) » Delaware (down from 39.4% to 37.2%) » Indiana (down from 43% to 40.9%). At the other end of the scale, equity-rich levels rose in 23 states from the fourth quarter of 2023 to the first quarter of 2024, mostly by less than one percentage point. The largest improvements were concentrated in the Midwest and West regions, led by: » South Dakota (up from 49.8% to 51.5%) » Hawaii (up from 55% to 56.5%) » Montana (up from 57.3% to 58.7%) » North Dakota (up from 30.4% to 31.5%) » Mississippi (up from 37.3% to 38.3%)

by admin
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Drop-off in Zombie Homes Tracks Broad Slowdown in Lenders Pursuing Delinquent Homeowners ATTOM, a leading curator of land, property, and real estate data, released its second-quarter 2024 Vacant Property and Zombie Foreclosure Report showing that 1.3 million (1,289,387) residential properties in the United States sit vacant. That figure represents about 1.3 percent, or one in 79 homes, across the nation – the same as in the first quarter of this year. The report analyzes publicly recorded real estate data collected by ATTOM — including foreclosure status, equity and owner-occupancy status — matched against monthly updated vacancy data. The report also reveals that 237,208 residential properties in the U.S. are in the process of foreclosure in the second quarter of this year, down 2.3 percent from the first quarter of 2024 and down 23.9 percent from the second quarter of 2023. Foreclosure activity has declined this year following a surge in cases that hit after a nationwide moratorium on lenders pursuing delinquent homeowners, imposed during the Coronavirus pandemic, was lifted in the middle of 2021. Among those pre-foreclosure properties are about 6,945 sitting vacant as zombie foreclosures (pre-foreclosure properties abandoned by owners) in the second quarter of 2024. That figure is also down from the prior quarter, by 5.4 percent, and down 20.6 percent from a year ago. The latest count of zombie homes continues a long-term pattern of those properties representing only a tiny portion of the nation’s total housing stock – currently at just one of every 14,724 homes around the U.S. The ratio is down from 13,905 in the prior quarter and from one in 11,577 in the second quarter of last year, to the lowest level since early 2021. Zombie foreclosures numbers remain so small that most neighborhoods around the country face little or no threat of the blight and decay those homes can spread. The portion of pre-foreclosure properties that have been abandoned into zombie status, meanwhile, also went down slightly, from 3 percent in the first quarter of 2024 to 2.9 percent in the current quarter. “Predictions of a huge spike in foreclosures after the moratorium, with the potential for a surge in zombie properties, never came true. Indeed, the opposite has happened, as abandoned homes in foreclosure continue to get harder and harder to find around the country,” said Rob Barber, CEO for ATTOM. “Some signs have popped up over the past year that the long U.S. housing market boom is giving back some of its gains, which could lead to declining equity and more foreclosures. We are still far from losing the benefit of having zombie properties nearly disappear from the housing market landscape.” The dip in the number of zombie properties during the second quarter comes as the housing market remains buoyed by 12 years of price increases despite the recent markers of a slowdown. The nationwide median home value dropped quarterly in the early months of 2024 by 4 percent, to $330,000, but was still up 3 percent from a year earlier, according to ATTOM’s home sales analysis. It has increased every year since 2012, more than doubling during that time. Those gains have fueled a historic rise in homeowner wealth to the point where almost 95 percent of owners paying off mortgages have at least some equity built up and nearly 50 percent owe less than half the estimated value of their properties. Zombie foreclosures drop in more than half the country, remaining a non-issue in most neighborhoods A total of 6,945 residential properties facing possible foreclosure have been vacated by their owners nationwide in the second quarter of 2024, down from 7,338 in the first quarter of 2024 and 8,752 in the second quarter of 2023. The number of zombie properties has decreased quarterly in 30 states and annually in 38. As those numbers keep dwindling, the biggest decreases from the first quarter to the second quarter of 2024 in states with at least 50 zombie homes are in Ohio (zombie properties down 22 percent, from 597 to 466), Maryland (down 17 percent, from 104 to 86), South Carolina (down 14 percent, from 74 to 64), California (down 13 percent, from 310 to 269), and North Carolina (down 12 percent, from 67 to 59). The only quarterly increases among states with at least 50 zombie foreclosures are in Massachusetts (zombie properties up 12 percent, from 68 to 76) and Illinois (up 1 percent, from 719 to 724). Overall vacancy rates continue to hold steady The vacancy rate for all residential properties in the U.S. has remained virtually the same for eight quarters in a row. It stands at 1.26 percent (one in 79 properties), unchanged from the first quarter of 2024 and virtually the same as the 1.27 percent level in the second quarter of last year. States with the largest vacancy rates for all residential properties during the second quarter of this year are Oklahoma (2.27 percent), Kansas (2.18 percent), Missouri (2.06 percent), Alabama (2.04 percent) and Michigan (2.02 percent). Those with the smallest overall vacancy rates are New Hampshire (0.36 percent), New Jersey (0.41 percent), Vermont (0.44 percent), Idaho (0.47 percent) and California (0.64 percent). Other high-level findings from the second quarter of 2024: Media Contact:Megan Huntmegan.hunt@attomdata.com SOURCE ATTOM

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Zillow analyzed rent affordability, job openings and the number of residents in their 20s to come up with this year’s ranking of the best markets for new college grads College seniors who visited Phoenix for last month’s NCAA basketball championship might consider staying and putting down roots. Phoenix is the best market for this year’s college grads, boasting the best combination of rental affordability and concessions, job prospects and neighbors in their 20s for the class of 2024 to start life’s next chapter on a high note. Albuquerque, Colorado Springs, San Antonio and Portland, Oregon, round out Zillow’s top five markets for new college grads. “The first move after college is an exciting milestone. Zillow’s best markets for new grads are great places to kickstart a career and take the first steps of adulthood,” said Anushna Prakash, economic research data scientist at Zillow. “Rents won’t take up too much of a new grad’s paycheck, leaving money to explore a new city or start saving up for a down payment. For renters who don’t mind a housemate or two, renting a room can help save some extra cash and might even introduce lifelong friends.” Zillow’s best markets for new college grads offer promising career opportunities as well as relatively affordable rentals. The analysis looks at rent affordability,1 the share of rental listings on Zillow® offering a concession, job growth2 and the share of the population ages 21–29. Phoenix rose to the top largely on the strength of its job market, which is the second-strongest among the markets Zillow analyzed. Phoenix also ranked within the top 10 for the share of rental listings on Zillow offering a concession, such as a free month of rent or free parking (50.5%), helping to overcome relatively expensive rents. A college grad making Phoenix’s median entry-level income would spend 34.5% of that on the typical Phoenix rental. For new grads who consider affordable rent their top priority, Des Moines, Iowa, is the place to be. Des Moines placed No. 11 overall in Zillow’s ranking, and took the top spot for rent affordability. A typical college grad can expect to spend less than a quarter of their income on the typical rental there. New grads looking to score a deal on a rental can focus their search on Charlotte, which comes in at No. 14 overall. Fifty-seven percent of Charlotte rental listings on Zillow are offering a concession, more than any other market Zillow analyzed. Zillow Rentals provides new grads with a wide range of rental options to suit every lifestyle and budget, from apartment buildings with a doorman to single-family rentals with private backyards. Additionally, Zillow recently introduced the option to search for individual rooms for rent, perfect for those looking to split costs with roommates and ease the financial burden as they enter the rental market. SOURCE Zillow CONTACT: Alex Lacter, Zillow, press@zillow.com