Will An AirBNB Downfall Save Us All? - Real Talk

Well, hello, everybody, this is kind of a special little bit of a live stream that we're doing. I decided to do this one just because I thought something was super, super interesting to me. And I wanted to do it. I saw a tweet the other day. And basically, they were talking about an Airbnb collapse. And this has kind of been making the rounds. A lot of people posted this on Facebook. I'm going to bring up the chart here in a second, but it talks about Airbnb revenues collapsing in a bunch of markets around the United States.

And I can be thinking, if the Airbnb market here in Southern California were to collapse, would that alter the dynamics of our real estate market? Would that save us would that give us enough inventory to really make a difference for homebuyers, and rather than guests, I thought it would be fun to kind of run through the numbers. So I'm gonna go ahead and throw this up here. There's a little bit of a caveat, the person who did this original tweet, which has been getting a ton of traction, this person has kind of been, I don't want to say discredited to some degree. But, you know, I'll go ahead and say nobody can match his data.

And his reputation is not very good. In terms of being truthful, he kind of just likes to get a bunch of clicks. But I thought it was an interesting idea. So let me go ahead and kind of go through the numbers on this. So what we have here is, is there an Airbnb collapse, and you know, some other people kind of run to other data sources, right. And what this stands for here is revenue per listing. I'm just gonna go over this kind of just for a second. But if you see like, I mean, gosh, they even have like a New Orleans are down 37% revenue. Of course, everybody else's numbers do not look nearly as drastic, we do see revenue per available listing going down. But you see here in New Orleans, they've only got a 15% decline. So I thought, you know, barring that, here we are in Southern California, what would a disastrous outcome realistically be? I think if Airbnb revenue were to drop by 50%, I think that would be pretty cataclysmic to the short term rental industry.

So if that were to happen, what what's the result? Right, people are going to sell some of those homes, you know, they're not going to stay on the market. So, you know, right now, in Los Angeles counties, I kind of just picked LA County to run the numbers on in LA County, we have 29,491, active Airbnbs. These are listings that are where you get the whole unit, right, like the entire condo, the entire house, I don't think it's really fair to compare kind of rooms for rent, that doesn't really add to the housing stock. But I want to put that number in reference, right, because that sounds like a huge number of properties, right? 29,491 Airbnbs.

But this past 12 months, meaning from today, looking back a year, in Los Angeles County, there have been about 47,000 homes sold. And that is a particularly bad year from sales. So if you look, for example, 2021 there was 77,000 homes sold in Los Angeles County. So is 29,000. Airbnb is significant. Yes, but not necessarily Earth. Shattering, right. So if we go ahead, there's some other important stats I think people want to know about listings in Los Angeles County. So as of right now, today, this second, which is June 29 2023, there are 8308 properties that are either active coming soon, or on hold, right. So 8300 province, that's actually that's just a given snapshot in time, was active on the MLS, and available in LA County.

And so I think it's kind of interesting to take a look at that number. By the way. Another interesting stat that is important for our discussion, is that there was 6024 new listings that came up onto the market. So that means things that came onto the market in the past 30 days. There are about 5200 properties in escrow right now, just in under contract somebody is trying to buy them hasn't closed yet. And 40 409 properties closed in the last 30 days. So basically, if you take that available number that 8300 and you divide it by about 4400, you get just a little bit under two months of relative inventory. That means if no new properties came on the market at the rate we're going we would get rid of all of our listings in two months. Okay, back to the Airbnb collapse. So, there are 29,491 active Airbnb listings in Los Angeles County.

And again And let's suppose there's a cataclysmic event, right? 50% of that revenue goes away revenue drops by half, we slash that, by the way, economically, if that were to happen, my guess is the Fed is slashing rates pretty fast. If that's the economy we're in, we're Airbnb revenues, fallen 50%. So if we say that that's a 50% decline, and let's pretend that the market is somewhat efficient, you would expect that approximately 50% of those Airbnb listings would have to go away, right? It's not a sustainable business, if revenue drops by 50%. So if we take that 29,004 91, we say over a 12 month period, half of those Airbnb e's are going to turn into something else, right? So that's 14,746 units that are going to turn into something else other than an Airbnb Now, you might think, okay, over 12 months, that's 14,000 new listings that are going to come to the market.

That sounds pretty significant, right? Well, remember, those would come over 12 months. But there's another problem, right. And that problem is not all of these properties that are taken out of the Airbnb pool, are going to turn into new home listings, I think some of these problems are going to turn into long term rentals. And I think some of these properties might actually just turn into plain old second homes, right, or kind of friends and family rentals where somebody's not really doing it as a business, they don't really need to make money, what they're really hoping to do is just offset their costs of owning a property that they were planning on buying anyway. So I figure 50% of those properties are probably not going to turn into a listing. So the reality is, even though close to 15,000, will exit the Airbnb marketplace, I think that only 50% of those will actually turn into listings that's 70 373 new listings that are going to come in the space of a year, because of an Airbnb collapse.

That works out to 614 new listings per month. So remember, we are in a very, very low inventory environment. Right now, in Los Angeles County, we are actually in a spot where we have the fewest number of listings, really, that we've had in a while our inventory is less than it was last year. So right now we've got 80 308 that are in this pool of on the market, but not in escrow yet. So we'd be adding 614 of those per month 614 versus 8300. Would I do I think it would make a difference in the market? Yes. Do I think it would make a very big difference in the market? No, I think this would have a negligible impact on prices. And unavailability as an example, in Los Angeles versus last year, that 8300 number is down roughly 30 40% from where it was a year ago today. So you know, imagine what the market was like a year ago. And that's essentially what it would be like, I think it might move that months of inventory, just to crest over two months versus under two months, I really don't think that would make very much of a difference at all.

So unfortunately, for those of you sitting on the sidelines, who saw this tweet from this individual, Airbnb revenues are crashing, hallelujah, there will be more listings on the market available for you to buy and prices will fall, it probably would not work out that way. Even if that were the case, that is not going to be what really fuels inventory in our market. And really, that is the crux of the issue. There's not a lot of things in our market, that will change the amount of inventory that we have. The number one thing that will change the amount of inventory that we have is lowering of interest rates so that people who have been sitting on the sidelines wanting to make a move, can sell their current home and buy another one unfortunately, that will also add a buyer into the market pool. So you will add a new listing but you also unfortunately, add someone who's looking to buy another property that ends up being pretty much a net, you know, a zero sum game, it doesn't really make much of a difference.

Anyhow, thank you for watching this little fun episode of Real talk. I hope you've liked it. My name is Stephen Meade. I am the managing broker here at domicile real estate located in Southern California. We help buyers and sellers in Los Angeles and Orange County. So if that's you definitely reach out to us. We would love to chat. Anyhow, happy Thursday going into Fourth of July week. Should be fun. As always be safe out there. Questions, comments about real estate? We love those. If you're watching us on YouTube, we're gonna post this don't forget to like subscribe and hit that notification bell. We will see you again real soon.