Fed Rate Hike and Hot AirBNB Market Overview

Fed Rate Hike and Hot AirBNB Market Overview

Senior Loan Officer
Brian Decker
Published on July 22, 2022

Fed Rate Hike and Hot AirBNB Market Overview

As expected, the Federal Reserve raised the Fed Funds rate by 50 bps, which is exactly what the markets were expecting them to do. The Fed Funds Rate does not directly impact mortgage rates. The Fed Funds rate directly affects credit card rates, auto loans, and home equity loans.

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They acknowledged that inflation is a serious concern and is starting to affect consumer spending. The U.S. economy is not growing as Q1 of 2022 showed the economy contracted by a rate of 1.4% annually, instead of their initial estimate of growing by 1%. We want the economy to slow down as this will bring down consumer prices and bring about a more normal economy and housing market.

Housing markets in the U.S. will behave very differently over the coming months. Markets heavily dependent on tech jobs are likely to see a greater slowdown than suburbs with a more balanced job market. Tech housing markets like Seattle, San Francisco, Austin, and Denver will see slow home price growth as the NASDAQ is down more than 20% on the year. More than 50% of the companies in these markets lost money last year, and growth tech companies have started layoffs (Robinhood, Netflix, Better, etc). I expect these markets to see minor home price declines by the end of the year as venture capital funding for high-growth companies is slowing. Homes for sale in Salt Lake City, Seattle, Boston, Raleigh, Los Angeles, Boise, and Los Angeles have seen inventory levels increase by more than 20% from March to April. This means more homes for sale, fewer price wars, and likely slowing housing markets to a more NORMAL level.

Housing markets like Miami, San Diego/Riverside County, Orange County, Houston, Phoenix, Chicago, Scottsdale, Birmingham, Las Vegas, Memphis, Pittsburg, Sacramento, Fayetteville, and Virginia Beach will suffer from a serious shortage of homes for sale for likely several years to come. These markets did not build nearly enough homes for the jobs they created over the last 15 years. Comparatively, Austin and Nashville built 5 houses for every 100 jobs last year. At the same time, San Diego built less than 1 house for every 100 jobs in the economy. These markets will likely see 3% to 10% price appreciation over the next 12 months.

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Summary:

With mortgage rates at 15-year highs, individuals are staying put in their homes, forcing new homebuyers to have even fewer options available. With over 60% of all mortgages at a 4% rate or less and 30% at less than a 3% rate, homeowners do not want to give up their low rate and payment. Mortgage payments have increased by 40% for the same home over the last 12 months. Now in markets like the ones mentioned above that have very limited new construction homes coming to market, we will continue to see stable home prices. However, in markets that have a lot of new construction homes in the pipeline, like Austin, Boise, and Raleigh, we will see higher rates and higher inventory slowly push home values lower.

Once the Federal Reserve gets inflation cut in half and the economy officially gets declared it’s in a recession, we will see the Fed likely slowly reverse course. This will probably bring mortgage rates back down into the 4%s by early to mid-next year. So for homeowners looking to buy in a strong market, I would look for the right home, deal with a slightly higher payment for 12 to 18 months, then refinance.

If you are looking for information on an additional housing market, anyone that is Pre Approved by myself at Modern Lending, I can run a full detailed 6 to 7-page report for you at no cost.

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Speaking of housing markets, here is a detailed overview of one of my favorite Short Term Rental Markets. Each week I will include a Summary breakdown like this. If you would like a particular market covered, please email me, and I will add it to the list.

Temecula Airbnb Overview

Average Occupancy: 76%

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Best Location: Near Wineries

How To Make Money on Airbnb in Temecula, California $7997 Per Month

  • Price your Airbnb listing relative to other listings with the same bedroom and bathroom configuration. A good gauge is the average price rate, bedrooms, and bathrooms for the overall market.
  • Make sure you are competitive when it comes to property amenities. You can reference the data for amenities within Temecula, California.
  • Make sure you optimize your Airbnb rental listing description. To optimize it with keywords in your rental market, you should have a look at this chart with data sourced from the Temecula, California Airbnb market.
  • The average number of Beds in Temecula, California for AirBnB is 4
  • The average number of Bathrooms in Temecula, California for AirBnB is 3
  • The average Person Capacity in Temecula, California for AirBnB is 7
  • The average Price Rate or Amount Charged in Temecula California for AirBnB is $579/night for a 3BD and $627/night for a 4BD in Temecula Wine Country. Now I have a 3BD that does over $600-$900/night due to amenities and season.

The average price for a 3BD home in Temecula Wine Country is $1,100,000 currently. This would provide a monthly payment of $6,500/mo, approximately 20% down.

  • Doing a 3BD Airbnb in Temecula Wine county, assuming 14 bookings a month, you should expect to make $8,105 renting your property on Airbnb per month.
  • Doing a 3BD Airbnb in Temecula Wine Country, assuming 20 bookings a month, you should expect to make $11,580 renting your property on Airbnb

Questions about buying a home or AirBnB?

Schedule a free 15 minute phone consultation.

 

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Senior Loan Officer
Brian Decker Senior Loan Officer
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844-4-Modern

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