Rocket Fuel Newsletter – 09/09/2024
If you’re craving traditional Italian food without taking a trip to a nice restaurant, Heinz has you covered! The food giant has released their latest creation: spaghetti carbonara in a can – guaranteed to have you tuck your napkin into the collar of your shirt.
Bon Appetit!
In this edition: The latest Build-A-Broker: The Journey podcast drops, rental markets cool (but housing prices don’t) and how the short-term rental business impacts the housing market.
Fuel Up! 🚀
New Build-A-Broker: The Journey Podcast Alert!
In this episode of the Build-A-Broker podcast, we dive into the journey of Jordan Gerard, the President and Owner of My Community Mortgage. Originally aspiring to attend law school, Jordan’s path took many turns, including various majors in college before landing a job as a bartender. Facing numerous challenges, from begging his mom for money when his car payments were three months behind to borrowing $10k from a buddy to open his brokerage, Jordan's resilience and determination led him to become a successful mortgage broker.
Today, Jordan writes 100 loans a year and leads a team of almost 100 employees. He shares his strategy on moving from the "friend zone" to becoming the go-to mortgage guy, emphasizing the importance of converting friendships into valuable business relationships. He also discusses finding his niche and the unique value of becoming a broker, enabling him to provide clients with exactly what they need.
Rental Markets Cool, But Still Exceed Pre-Pandemic Levels
Rent markets have increased over 20% from their pre-pandemic levels, according to research from the Joint Center for Housing Studies of Harvard University. Though month-over-month rent growth has cooled to pre-pandemic levels, actual average rent remains far above pre-pandemic levels across markets; moreover, relief from new construction that contained rent growth is likely to be short-lived due to recent declines in multifamily starts.
Even with recent cooling, historically high pandemic-era rent hikes have created dire affordability issues for some renters as incomes have failed to keep pace.
U.S House Prices Increase
House prices rose in all 50 states and nationally rose 5.7% between the second quarter of 2023 and the second quarter of 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index.
The five states that saw the highest appreciation were all in the eastern U.S., with Vermont leading at 13.4%. Surprisingly, California and the West as a whole saw growth below the national average: California came in at 4.1%, Texas grew at 2.6% and Idaho saw the least amount of growth nationwide at 1.1%.
The Long-Term Effects Of Short-Term Rentals
Short-term rental (STR) platforms like Airbnb have revolutionized the way we travel, offering unique and often more affordable lodging options. However, their impact on the housing market has been a hot topic of debate.
On one hand, these platforms provide homeowners with an opportunity to earn extra income, but on the other, they potentially contribute to rising rents and housing shortages in popular cities.
A 2021 Harvard Business Review (HBR) study indicated that the growth of home-sharing through platforms like Airbnb has contributed to about 20% of the average annual increase in U.S. rents and about 14% of the average annual increase in U.S. housing prices.
How has this happened?
Properties that might otherwise be available for long-term rentals are instead listed as short-term rentals, reducing the overall supply of housing. Another HBR study on the same topic found that a 1% increase in Airbnb listings translates to a 0.018% increase in residential rents and a 0.026% increase in home prices. While that is a seemingly small increase, this can make housing less affordable for local residents over time.
However, that same study goes on to reveal that short-term rentals (STRs) can also have a significant positive impact on local economic growth. When demand for STRs is high, communities tend to invest more into residential development. While restricting STRs dampens rent increases, that also means it will dampen property values, and consequently tax revenue.
New York City has been at the forefront of regulating short-term rentals. In September 2023, the city introduced Local Law 18, mandating that hosts must register with the city, be on-site during the stay, and accommodate no more than two guests at a time. The aim was to curb the negative impact on the housing market and ensure that short-term rentals do not exacerbate the housing crisis. According to data provider Inside Airbnb, these regulations have led to an exceptionally high number of unlicensed listings, with only 6% of listings fully complying.
Airbnb has argued that these regulations have failed to deliver on their promise. Since the law took effect, NYC has seen an 83% decrease in listings under 30 days. Airbnb recently published an article stating the new rules have led to higher prices for travelers without significantly impacting the housing market.
While short-term rental platforms like Airbnb offer many benefits, they also pose challenges to the housing market. The situation in New York City highlights the complexities of regulating these platforms.
As cities continue to grapple with these issues, finding a balance that protects both residents and hosts will be crucial. Whether through more nuanced regulations or innovative solutions, the goal should be to ensure that short-term rentals contribute positively to the community without compromising housing affordability.
- Job Openings Fall To Lowest Level Since 2021
- Consumer Sentiment Improves A Bit More In Late August
- Two-Thirds Of Fed Districts Report Flat Or Declining Activity
- Fed Beige Book [PDF]
Last week’s puzzle was one of our most popular of the year! Nearly a third of all solvers finished in 2 minutes or less, with six doing so in less than a minute. Congrats to our leader who finished in an impressive 24 seconds!
This week’s puzzle gets 2 Rockets out of 5.
