Is The Phoenix Airbnb Market Collapsing?

The Phoenix Airbnb Market has been a hot topic this past week with concerns about the stability of the market, and some speculating that it may be collapsing. However, upon closer examination, it appears that these concerns may be very premature and the data source incorrect. 

First up we have the viral graph tweeted by Nick Gerli, who it's important to note is a bit of a real estate crash "chaser".

As you can see this data is very shocking. Phoenix ranks #2 in revanue collapse in the United State. Showing a decline of over 47%! This data was pulled from alltherooms.com and was calculated as a "3 month average". 

Other reputable companies such as airdna.com and beyondpricing.com began to speak up on Twitter that their data was simply not matching up with Nick's. Yes, there was some decline but not nearly to the numbers the viral graph was showing. Have a look for yourself! 

That is quite a difference! The AirDNA data shows Phoenix at an only 3% decline vs the 47.2% being discussed EVERYWHERE on the internet. Several other companies backed this new set of data with some small variations but nothing to write about. Several vacation rental owners were also chiming in that they felt no change in their revenue and they don't see how that sharp of a decline in the data is possible. 

I am not going to tell you who to believe but I am going to make some points about our short term-rental market 

1. Greater Phoenix does have an over saturation of STRs and has for almost 2 years now. It has led to anybody and everybody thinking they can take advantage of tourism and do so at top dollar. No, you can't rent you 1990 original conditon home in a surbuban Scottsdale Mr. Homoeowner for $500 a night. The gig is up and should have been up a year ago! Playing in the Airbnb field requires a desirable property in a location vacationers actually WANT to spend their hard earned money and time off at. It needs to be managed properly and efficiently based on the ever changing local laws. I am here for a "thinning of the heard" so to speak when it comes to the garbage properties that no one wants to rent! 

2. As our market corrected in the summer of 2022 and cities began to crack down on regulations, we saw investor began to unload their inventory and lessen their risk. It has been slowly happening and I would assume will continue but it hasn't led in any way to an inventory dilema. Since we are talking inventory, it's very important to note how low the supply is of overall homes for sale in the valley. You can't have a market crash for Airbnb owners selling off their properties without it causing a huge shift in our inventory. I believe STR inventory would be a healthy additiona to our resale market! 

3. Airbnb inventory is generally updated and move-in ready inventory which is marketable and desirable to buyers compared to the latter. If it does hit the market, again, it's GOOD and NEEDED at the moment but what would force an investor to sell their STR property? It would have to be a loss that they can't afford any longer. 

4. The investors at most risk for loss are those who bought in the last 2 years with higher market prices and those who did so with a mortgage to pay each month making the month over month cash flow tough as vacancies increase or pricing adjusts downward. The question is, do we really have that many investors at this high risk level to cause a CRASH? No, we don't. 

In summary, do I believe the Airbnb market is going to implode? No, I believe it's correcting. Corrections, although can be unfortuante for those who get caught up in the storm, are necessary and healthy for the market. Real estate is a long term play. Period. If you jump in with any other intention, you have to know there is risk.