earnings

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The FDIC said its “problem list” of banks grew to 117 institutions in the second quarter as reported net income earned by FDIC insured commercial banks and thrifts plunged.

It’s the highest total for the infamous list since mid-2003, as assets of troubled banks increased from $26 billion to $78 billion, including a whopping $32 billion from recent failure Indymac Bank.

Net income earned by all FDIC insured institutions during the second quarter totaled just $5 billion, a $31.8 billion, or 86.5 percent decline, from the same period in 2007.

Aside from the fourth quarter of last year, earnings were the lowest for the industry since the fourth quarter of 1991.

“By any yardstick, it was another rough quarter for bank earnings, but the results were not unexpected as the industry coped with financial market disruptions, the housing slump, worsening economic conditions and the overall downturn in the credit cycle,” said FDIC Chairman Sheila C. Bair, in a release.

“More banks will come on the list as credit problems worsen,” she added. “Assets of problem institutions also will continue to rise.”

The FDIC said higher provisions for loan losses were to blame for the drop in profits, especially at a few large institutions (probably Countrywide and Indymac), though more than 50 percent of all insured institutions reported lower net income.

A staggering $50.2 billion was set aside for bad loans, primarily tied to real estate, during the second quarter, up from $11.4 billion a year earlier.

Net charge-offs for 1-4 family residential mortgage loans increased 821.9 percent from a year ago to $5.8 billion, while home equity loan charge-offs surged 632.7 percent to $2.8 billion.

The dollar amount of loans 90 days or more behind in mortgage payments increased by $26.7 billion, or 20 percent, during the quarter, similar to the $26.2 billion rise in the first quarter and the $27 billion jump in the fourth quarter of 2007.

As of the end of June, 2.04 percent of all loans and leases were considered non-current, the highest level since 1993.

The dismal results caused the FDIC’s Deposit Insurance Fund reserve ratio to fall to 1.01 percent during the quarter, and because it now lies below 1.15 percent, the FDIC must develop a “restoration plan” aimed at raising it back to at least 1.15 within five years.

(photo: r000pert)

Source: thetruthaboutmortgage.com

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Asset turnover ratio is a calculation used to measure the value of a company’s assets relative to its sales or revenue. It’s used to evaluate how well a company is doing at using its assets to generate revenue.

Similar to cash flow, the asset turnover ratio compares the company’s total assets over the course of a year to its sales. In simpler terms, it shows the dollar amount the company is earning in sales compared to the dollar amount of its assets. It can be calculated annually or over a shorter or longer period of time.

Why Is Asset Turnover Ratio Important?

Although having cash on hand is important for growing and maintaining a business, other types of business assets are also important, as is how a company chooses to use them. Liquid assets can include cash, stock, and anything else the company owns that could be easily liquidated into cash. Fixed assets are things the company owns that are not as easily turned into cash. This could include real estate, copyrights, equipment, etc.

For business owners, asset turnover ratio can be important when applying for loans and learning about their company’s cash flow. A higher asset turnover ratio indicates that a company is efficiently generating sales from its assets, while a low ratio indicates that it isn’t. A higher asset turnover ratio also shows that a company’s assets don’t need to be replaced or discarded, that they are still in good condition.

A higher ratio is preferable for investors, as well. Investors can look at the asset turnover ratio when evaluating the risk of investing in a company, or when comparing similar companies to one another. Each industry has different norms for asset turnover ratios, so it’s best to only compare companies within the same sector. For instance, a utility company or construction company is more likely to have a higher number of assets than a retail company.

Know, too, that asset turnover ratio is only one of many calculations that comprise the list of financial ratios that investors can employ.
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Formula for Calculating Asset Turnover Ratio

It’s fairly simple to calculate asset turnover ratio, which is one reason it’s such a useful tool for investors. Asset turnover ratio can be calculated using the following formula, which divides total (net) sales or revenue by average total assets:

Asset turnover = Net Sales / Average Total Assets

Which can also be shown as:

Asset turnover = Net Sales / ((Beginning Assets + Ending Assets) / 2 )

Where:

Net Sales = Gross annual sales minus returns, allowances, and discounts. Total sales can be found on a company’s income statement (typically part of an earnings report).

Beginning Assets = Assets at the beginning of the year

Ending Assets = Assets at the end of the year

Total Assets = Generally a company will include calculated average total assets on their balance sheet. However, sometimes additional calculations will need to be made.

Calculating Total Assets

The value of a company’s total assets includes the value of its fixed assets, current assets, accounts receivable, and liquid assets (cash).

•   Accounts receivable are accounts that hold expected revenues that come from when customers use credit to buy goods and services.

•   Fixed assets are generally physical items such as equipment or real estate.

•   Current assets are things that the company predicts will be converted into cash within the next year, such as inventory or accounts receivable that will be liquidated.

The formula for calculating total assets is:

Total Assets = Cash + Accounts Receivable + Fixed Assets + Current Assets

Example of Calculating Asset Turnover Ratio

To give an example of the ratio calculation, if a company has $2,000,000 in average assets and $500,000 in sales over the course of a year, the calculation of its asset turnover would be:

500,000 / 2,000,000 = 0.25 = 25% asset turnover ratio

Interpreting Asset Turnover

Sticking with the example above, we’ve calculated a 25% asset turnover ratio. What that means, exactly, is that the company’s assets generated 25% of net sales over the course of the year. In other words, every $1 in assets that the company owns generated $0.25 in net sales revenue. Again, this can be helpful when using various business valuation methods and trying to determine whether an investment fits your overall strategy.

Factors that can Cause Low Asset Turnover

There are several reasons why a company might have a low asset turnover. These include:

•   More production capacity than is needed

•   Inadequate inventory management

•   Poor methods of customer money transaction

•   Poor use of fixed assets

The ratio can also change significantly from year to year, so just because it’s low one year doesn’t mean it will remain low over time.

What Is a Good Asset Turnover Ratio?

Investors can use the asset turnover ratio as part of comparing and evaluating stocks. But what is considered a good number for asset turnover?

In general, the higher the number the better — and a number higher than 1 is ideal. This is because a value greater than 1 means the dollar value generated by assets is greater than the dollar amount that the assets cost. A higher number means a company is generating sales efficiently and not wasting assets.

Conversely, a number less than 1 means that assets are generating less than the amount of their dollar value. If a company isn’t effective at generating sales with its assets, it most likely wouldn’t be a great investment — which, again, is important to know if you’re building an investment portfolio.

Since each industry has its own standards for a “good” asset turnover ratio, there isn’t one specific number to look for. For companies in the utilities industry, ratios are generally lower than companies in retail.

Companies can work on improving their asset turnover ratio by increasing sales, decreasing manufacturing costs, and improving their inventory management. Other ways they can improve include adding new products and services that don’t require the use of assets, and selling any unsold inventory still on hand.

What Does a High Ratio Imply About a Company?

If you’re using technical analysis techniques to get some clarity around a company as a possible investment target, you’ll want to get down to brass tacks: What, exactly, is a high ratio telling you?

The answer is that a high ratio implies that a company is in good standing. It’s generating value with its assets, which can signal that it may be a solid investment. But, again, there are no guarantees.

Limitations of Using Asset Turnover Ratio

While asset turnover ratio is a useful tool for evaluating companies, like any calculation, it has its limitations. It is useful for comparing similar companies, but isn’t a sufficient tool for doing a complete stock analysis of any particular company.

Also, a company’s asset turnover ratio could vary widely from year to year, making it an unreliable measure for potential long-term investments. Even if the ratio has been similar in years past, this doesn’t mean it will continue to remain consistent. However, investors can look at the long term trendline of the ratio to get a general indication of whether it’s improving or not.

Since asset turnover is typically calculated once a year, if a company made even a few large purchases this could skew their ratio. This is fairly common, as companies might have certain monthly expenses but occasionally need to invest large sums of money into equipment, office renovations, or other common business needs.
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Drawbacks of Asset Turnover Ratio in Stock Analysis

The limitations outlined above play into some of the potential drawbacks of the asset turnover ratio when analyzing stocks, too. Mostly, it comes down to the fact that as a single ratio, which doesn’t reveal the total health or financial picture for a single company. For that reason, it’s probably a good idea to use the ratio in tandem with other analysis tools and methods.

For instance, other ratios that can be used to gain an understanding of a company’s financials are the debt-to-equity ratio, its P/E ratio, and even looking at its net asset value.

The Difference Between Asset Turnover and Fixed Asset Turnover

Fixed asset turnover and asset turnover are two different ratios that can tell you about a company, and for investors, it’s important to understand the difference between the two.

In short, and to recap, asset turnover ratio looks at average total assets of a company — “total,” in this case, being the important qualifier. On the other hand, fixed asset turnover ratio looks at a company’s fixed assets to measure performance.

Investing With SoFi

Knowing how to calculate asset turnover ratio can be useful for investors who are evaluating companies as they start building an investment portfolio. While the formula is simple — Asset turnover = Net Sales / Average Total Assets — it’s important to remember that the calculations work best when comparing companies within one industry, rather than across various industries.

Additionally, there are other metrics by which to evaluate a company or value its stock. The asset turnover ratio can be helpful, but it has its limitations. As always, speak with a financial professional if you feel like you’d benefit from more guidance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

How can you improve asset turnover ratio?

Some ways that a company can improve its asset turnover ratio include increasing its revenues, selling some of its assets, renting or leasing assets rather than purchasing them, and optimizing its inventory and ordering systems.

Is an asset turnover of 1.5 good?

Yes, an asset turnover ratio of 1.5 is a sign that a company is on solid financial footing. It indicates that a company’s total assets are generating enough revenue from its current assets.

Can asset turnover ratio be negative?

Yes, and a negative asset turnover ratio would be a signal that a company lost money during the year, rather than earned it. A negative number represents that its liabilities or expenditures exceeded its assets.

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The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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Source: sofi.com

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Are you an agent because you want to achieve financial freedom? Real estate can be a great way to do it—if you learn to leverage your commissions. Today’s guest, Michael Banovac, built an impressive net worth by putting his commissions back into his personal real estate portfolio. Listen and learn about the best ways to leverage your real estate knowledge, earnings, and brand to build your net worth fast. Michael also covers ways to win luxury listings, where to focus your time, and who to partner with when developing real estate.

Listen to today’s show and learn:

  • About Michael Banovac [0:47]
  • Michael’s start in real estate [3:17]
  • Buying and renting your first property [7:49]
  • How to get approved for a home loan as a new real estate agent [11:16]
  • Tracking your net worth [14:31]
  • Financial freedom [16:51]
  • Creating higher margins for less work in real estate [17:54]
  • Shelby Johnson’s first year in real estate [21:08]
  • How to get started with luxury listings and real estate development [21:41]
  • Location, location, location [24:29]
  • The best way to work the best real estate locations [25:31]
  • Grant Cardone’s best piece of advice for real estate agents [27:18]
  • Layers of legitimacy and cultivating your personal brand [28:46]
  • How to put yourself in the same room as successful people [33:25]
  • A big benefit to running a podcast [36:10]
  • Who to partner with when developing luxury properties [37:31]
  • The riches are in the niches [40:37]
  • Being selfish to become selfless [42:28]
  • Changing your mind to change your circumstances [45:38]
  • Where to find and follow Michael Banovac [46:29]
  • Michael’s final piece of advice for listeners [48:07]

Michael Banovac

Michael’s expertise encompasses Real Estate, Marketing, and Internet Entrepreneurship. He currently holds an Arizona Real Estate License with The Agency at EXP Realty and is partners with Tarek El Moussa (the star of HGTV’s Flip or Flop & Flipping 101).

He prides himself as the agent of choice for any professional seeking to buy or sell residential real estate in Arizona. In 2007, he was awarded the President’s Volunteer Service Award from President George W. Bush.

Related Links and Resources:

It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.

-Aaron Amuchastegui

Source: realestaterockstarsnetwork.com

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The Federal Deposit Insurance Corporation is suing over a dozen mortgage firms in federal courts to recoup funds over loans they brokered over 14 years ago for Washington Mutual. 

The agency in its complaints points to a combined 373 home loans it claims were defective for a variety of reasons, according to a National Mortgage News review of federal court records. While dollar amounts sought aren’t disclosed, some alleged bad underwriting for the loans in question includes five-figure kickbacks and six-figure borrower debts.

The FDIC’s pursuit stems from the fallout of its takeover of WaMu in 2008 during the Great Financial Crisis. Deutsche Bank, a trustee for mortgage-backed securities including the defective WaMu loans, sued the agency in 2009 for indemnification for its securities. 

The sides reached a $3 billion settlement agreement in 2017, in which the FDIC issued a receivership certificate, which grants payments to Deutsche Bank as the FDIC recoups WaMu funds. The federal agency began requesting indemnification from mortgage companies in 2021 and none, according to court records, have acquiesced. 

“I’m really quite concerned about them taking this stance when they stand in the shoes of those banks who were really at fault, lenders at fault, not the brokers who are just giving them information they asked for,” said Mukesh Advani, a Bay Area attorney representing defendant Cal Coast Financial.

The FDIC sued East Bay-based Cal Coast in August over 21 mortgages the company brokered for WaMu and its subsidiary, Long Beach Mortgage Co. 

The FDIC declined to comment last week, while its counsel and other companies either declined to comment or didn’t respond to questions. Two lenders facing such lawsuits, Guild Mortgage and Supreme Lending, have responded to the FDIC’s complaints in brewing court battles. 

The 14 firms named in lawsuits in the past 12 months range from small operations to major players, such as Freedom Mortgage. Mortgage companies are being sued for indemnification for as few as 14 loans, in Guild’s case, to as many as 72 loans from Benchmark Mortgage. The Plano, Texas-based Benchmark is scheduled to take the FDIC to trial next June, court records show.

Other businesses the FDIC is suing include American Nationwide Mortgage Co.; Lennar Mortgage; The Mortgage Link; Mortgage Management Consultants; New Jersey Lenders; PNC Bank as successor to smaller firms; Primary Residential Mortgage Inc.; Pulte Mortgage and RealFi Home Funding Corp. 

The lawsuits are nearly uniform in length and language, describing the FDIC-WaMu receivership’s losses as arising from inaccurate and/or incomplete loan applications and documentation produced by the brokers. 

Each company signed broker agreements with WaMu and its subsidiaries, such as Long Beach Mortgage, in 2004 and 2005, according to exhibits attached to each claim. The FDIC in each case includes an exhibit describing in brief the defects of each loan, the majority appearing to be misrepresented credit or income and debt. 

In the FDIC’s lawsuit against Lennar, it alleges one borrower suggested a $60,000 monthly income, six times their actual earnings, while another homebuyer failed to disclose over $660,000 in mortgage debt from a previous property. Lennar last week declined to comment on pending litigation. 

Each lawsuit also cites a six-year limitation to file claims following the 2017 Deutsche Bank agreement, and attorneys for lenders said they anticipate more FDIC complaints against lenders. 

James Brody, an attorney with Irvine-based Garris Horn LLP, represents Guild and was recently retained by The Mortgage Link in its own FDIC litigation. In regards to the Guild lawsuit, Brody shared a statement this week calling the FDIC’s case “extremely weak” and noted the complaint’s lack of specifics around losses attributable to Guild’s brokered loans. 

“We certainly anticipate that there will be a number of motions for summary judgment that will be filed with the Court by most if not all parties that don’t decide to settle out because of their own cost/benefit considerations,” he wrote. 

Guild anticipates filing a motion for summary judgment to dismiss the lawsuit, Brody said.

Source: nationalmortgagenews.com

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In a margin-compressing environment, California mortgage tech firm Blend Labs is betting that its newly launched composable origination tech will help the firm recover from its financial losses. 

Available in its Blend Builder Platform, users can build their own origination products, leverage integrations, and use modular blocks to resolve the complexity of an existing technology infrastructure, the company said in an announcement about the launch on Tuesday.

Blend’s partners can take full advantage of composable origination through the Builder Platform, which provides pre-built integrations with all of the major tech stacks used in the financial services industry, including core banking systems, loan originations systems, customer relationship management and online banking platforms, Nima Ghamsari, Blend’s co-founder, explained.

“For business leaders looking to grow market share, deepen relationships and provide differentiated experience, composable origination provides the agility and speed you’ve always wanted to execute on your product strategies,” Ghamsari said.

The new composable origination tech provides a series of pre-built modular components, called blocks, for financial services. These blocks cover the entire end-to-end origination process, including pricing, income verification and closing, as well as an orchestration layer that allows lenders to create custom workflows in a low-code, drag-and-drop environment. 

In addition to the composable approach, Blend offers pre-built solutions, including instant home equity, deposit accounts and credit cards. These products are ready to use, with integration templates available that allow for quick deployment, Ghamsari noted. 

“With composable origination, leaders can supplement dev teams with easy-to-configure components across product lines and channels, all of which reduces costs and complexities, enabling rapid experimentation and delivery,” Blend said. 

Founded in 2012, Blend went public in 2021. The company’s white-label technology powers mortgage applications on the websites of major lenders, such as Wells Fargo and U.S. Bank, as well as those for smaller and more traditional financial institutions across the country. 

The company has recently expanded its product set in two ways. One is by diving deeper into the broader homeownership journey to offer ways for applicants to find homeowners and title insurance. Blend also expanded to offer additional lending products, such as home equity, personal and auto loans. 

Blend has had its eyes fixed on transitioning from a multiple-point solution model to a single platform business. Ghamsari previously said it would allocate an increased portion of operating expenses into the software Blend Builder.

In its latest third-quarter earnings, Blend reported a loss of $133.98 million, which was driven by a decline in mortgage banking and its title insurance business revenue, despite its consumer banking revenue more than doubling from the same period in 2021. 

Blend will be reporting its fourth quarter and 2022 financial results on Thursday. 

Source: housingwire.com

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Homeowners can now see potential short-term rental income estimates on Realtor.com thanks to an integration with Airbnb.

Short-term rental earnings estimates for hosting one room or the entire house will be available to homeowners via Realtor.com’s My Home dashboard, according to an announcement on Thursday.

The estimated earnings for a seven-day rental are based on Airbnb data from similar listings in the ZIP code.

A recent survey from Realtor.com and CensusWide found that 39% of homeowners have or would consider renting out part of their primary home, with 23% having rented out their home previously or are planning on doing so in the future and 16% reporting that they are considering renting out part or some of their home in the future.

Financial reasons are the primary motivator for homeowners to rent out their home, as 34% who have rented or plan to rent out their home are doing so in order to save money for a home purchase with a higher mortgage rate, while 29% are doing it prepare for potential upswings in a variable mortgage and 21% are doing it to help pay their current mortgage.

According to Realtor.com, the integration will also enable homeowners to see if it is a good idea to rent out their current home as an alternative to selling it. Of the homeowners surveyed, 60% reported they would consider renting out their current home rather than selling, if they look to buy or rent elsewhere, with 21% citing extra income from a renter and 19% citing the ability to maintain the home equity they have built as primary motivators.

“Short-term rentals are a great way to help with some of the costs of homeownership – renting out their house for a couple days or weeks out of the year when it’s not in use could generate extra income that can be put toward the mortgage, maintenance, or even help cover the cost of a vacation,” Mausam Bhatt, the chief product officer of Realtor.com, said in a statement. “By arming homeowners with information about how much they could potentially make by renting a room or their whole home on Airbnb, Realtor.com is helping them better understand their options and in turn make more informed decisions about their home.”

Realtor.com’s integration with Airbnb comes as many metro areas are looking to crackdown on short term rentals. Earlier this month, thousands of New York City Airbnb listings vanished from the market as the city introduces some of the strictest regulations in the U.S. for short-term rentals. City councils in Dallas, Philadelphia and New Orleans have passed their own restrictions on short-term rentals.

Source: housingwire.com

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“Accelerate was designed to reduce barriers and incentivize agents to grow their organizations,” Michael Valdes, eXp’s chief growth officer, said in a statement “It enables them to focus on selling and growing their businesses while earning the maximum potential revenue share for tiers two and three for the first year. Our aligned compensation model, where agents are rewarded for both production and contributions to eXp’s growth, brings more value than ever before.” 

This is the second change eXp has made to its revenue share program in recent months. In June, the brokerage announced that it was refining revenue share criteria, reducing the current FLQA tier 7 threshold from 40 to 30 FLQA. The firm also launched Boost, a program that eXp says financial incentivizes qualifying independent teams and brokerages to join eXp.

“In the lifespan of an agent, a critical component of long-term success is the ability to build for their retirement, so we launched Accelerate to help catalyze their potential earnings and create momentum in the first year and build for their future,” Sanford said in a statement. “We continue to be relentlessly focused on delivering a model that puts agents first. I couldn’t be more proud of what we have created, especially for those looking to build long-term wealth, with our revenue share and equity programs for agents, as well as a favorable cap and split model.”

eXp is among several brokerages to announce changes to revenue share programs. Earlier this week The Real Brokerage announced that any agent who has recruited at least five producing Real agents into their network will be bumped into the second tier of the firm’s revenue share program.

Keller Williams has also made changes to its revenue sharing program in recent weeks, announcing that it will cut the profit share distribution for vested “former” KW agents (agents who joined the company before April 1, 2020) who jumped ship to another brokerage from 100% to 5%. Previously, vested “former” agents benefited from a 100% profit share distribution even after their departure. However, former agents who return to the company within six months of the effective reduction date will have their profit share restored to 100%.

Source: housingwire.com

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If you peruse real estate listings on Realtor.com, you might come across a new Airbnb integration.

This week, the two companies announced a collaboration that lets homeowners see how much they could fetch to rent out a room, or the entire house.

It comes at a time when short-term rentals, or STRs for short, are somewhat under-fire given their immense growth.

The Airbnb story also happens to coincide with a residential housing shortage, with some critics blaming STRs on the lack of supply.

In any event, if you’re interested in seeing your Airbnb earnings estimates, you’ll need to add your property to Realtor’s My Home dashboard first.

How to Find Your Airbnb Host Estimate on Realtor.com

To get started, you’ll need to head over to the My Home dashboard on Realtor.com and add your property if you haven’t already.

This will also entail creating an account on Realtor.com if you don’t have one. It’s fairly simple and seems to only require an email and password.

From there, you’ll see a variety of information pertaining to the property added, including its RealEstimate, which is the site’s take on a Zestimate.

You’ll also see a tab titled “Host or rent,” which will contain your Airbnb host estimate. It provides both an entire home estimate and a room estimate.

A sample of the entire home estimate can be seen in the screenshot above. The single room estimate can be seen below.

It defaults to a 7 nights out of a month to give you a rough estimate of what you could earn via the Airbnb platform for renting it out for part of the month.

The estimates, which are provided by Airbnb, consider factors such as the zip code and bedroom count.

Airbnb reviews booking data over the past 12 months from the top 50% of similar listings (based on earnings) in the area where your home is located.

Then it computes nightly earnings, which are defined as the price set by each Airbnb Host minus the Airbnb Host service fee.

Note that Airbnb doesn’t subtract cleaning fees, taxes or other hosting expenses you might charge/incur when calculating the nightly estimate.

At the moment, these estimates are only available for U.S. addresses and do not factor in the number of guests a listing might accommodate.

And while they may strive to provide an accurate estimate, it’s just an estimate and no guarantee of what you’d actually earn.

Actual earnings can depend on a variety of factors, such as availability, listing price, and demand in the area.

Lastly, and here’s the biggie, the ability to host your property may also depend on local laws.

In other words, it may not actually be permitted to list your property as an STR in your city.

Is the Airbnbust Finally Upon Us?

There have been rumblings for a while now about a so-called “Airbnbust,” the premise being that too many first-time landlords purchased homes with the express purpose of making them STRs.

And now that there are so many of them, the hosts may encounter buyer’s remorse.

This could be due to unforeseen problems, a lack of experience being a host, complaints from neighbors, or simply that the earnings just aren’t there.

Throw in the fact that some hosts acquired multiple properties and these problems could be exponential.

Of course, some hosts might be raking in the dough, depending on how cheap they got in and how much demand their property has.

After all, many of these properties were purchased when 30-year fixed mortgage rates were 2-3%. And when home prices were half what they are now.

So even if competition rises, or they run into issues like unexpected refunds or cancellations on the platform, they may still do just fine.

But the real doomers out there think these STRs will be the first shoe to drop, setting off a panic and an eventual wider housing crash.

Critics on the other side say there aren’t enough of these properties to make a major impact, but in certain vacation areas there are larger concentrations.

Another issue is lack cities are beginning to ban STRs, with New York City being the latest to impose major restrictions.

This week, they launched new rules that only allow sub-30 day rentals if hosts register with the city.

And they “must commit to being physically present in the home for the duration of the rental, sharing living quarters with their guest.”

In other words, you can only rent out a room, like a traditional Bed and Breakfast, assuming it’s for less than a month.

And no more than two guests are allowed at a time, meaning larger families are effectively out of luck.

Obviously, sweeping changes like this could lead to a flood of sales if a long-term rental isn’t feasible (or simply as lucrative).

But it all remains to be seen. Many of those critical of Airbnb and other STR platforms such as VRBO, feel many of these properties could be going to families, instead of being rented out for a profit.

Especially first-time home buyers looking to lay down roots and start a family.

The STR gold rush may have also inadvertently sent home prices even further out of reach for the average person just looking to realize the American Dream.

Source: thetruthaboutmortgage.com