The Ins And Outs And The Ups And Downs Of Airbnb

Real Estate Survival Guide with Terry Story

During this week’s Real Estate Roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams about the rise in popularity of Airbnb, a company that allows people to open their homes like a hotel or bed and breakfast. The two discussed where in the country the most Airbnbs exist and the rules regulating them. They then talked about the mortgage industry and the true story behind The Big Short.

Airbnbs—As Always, Florida Is In The Mix

Regardless of the category—and specifically when it comes to real estate—Florida is always at the top of the list. True to this, Florida has the most Airbnbs of any state. Miami Beach, despite fairly strict rules regarding Airbnbs, has among the most of any city. Also on the list: Orlando (which makes sense because of Disney World), Kissimmee, and Sarasota. The cities are measured and listed based on an Airbnb-to-resident ratio.

Terry clarified some points for homeowners about offering their home on Airbnb, such as the fact that they can prohibit guests from doing things such as smoking in the house.

The Big Short

In the early 2000s, a group of hedge fund guys viewed the real estate market as becoming a little crazy. They decided they could take advantage of the situation by betting against mortgages by selling short. (This was immortalized in the book-turned-movie, The Big Short). Basically, they delivered borrowed mortgages which they would eventually have to return to the market to buy equivalent mortgages in order to close out their short-sell transaction.

The theory behind their selling short was that they would be able to buy back the borrowed mortgages sold when mortgage prices were much lower. When you sell short, you make money when the asset price goes down. These guys took an incredible amount of risk, especially during the early 2000s when the market was in a bubble. Many people believed housing prices would continue to go up and that selling short was a terrible idea.

Although they were wrong for a long time and had to weather severe financial distress to maintain their short position in the mortgage market, ultimately, they were proven right. The housing market crashed, mortgages prices tanked, and those guys made a fortune.

Something of notable concern now is that one of the “big short” investors is betting against mortgages again. Previously, the reason for the short sell was the fact that people were getting mortgages that never should have been given one in the first place; the market was bound to crash. Today, his reason for short selling is his belief in climate change. More specifically, this short-seller thinks that there are a lot of homes susceptible to flood damage that may occur as a result of climate change. Many of those homes are in Florida, as well as in California and Texas. His belief is that the mortgages on many of the homes are simply too big relative to the risk of losing the home to flooding. Only time will tell whether he’s right again.

If you’d like to learn more about Terry or buying or selling a home, head over to the Keller Williams website.