Short Term Rental Market: What to Expect in 2022
The 2021 real estate market was one for the record books. We watched in awe as home prices skyrocketed, bidding wars erupted, and buyers felt like they had a better chance of winning the lottery than getting their offer accepted. In the short-term market, homeowners entered the year hoping the end of local shutdowns would lower vacancy rates for their properties.
As we look back at 2021, we’re able to see progress in the wake of the pandemic. Demand for short-term rentals was strong in much of the country, average daily rates for rentals increased, occupancy levels remained high —and we don’t expect these trends to slow down in 2022.
Here’s a closer look at the indicators we’re watching and what we expect in the short-term rental market next year.
We’re Still Living in a Seller’s World
Common sense and the laws of gravity tell us that what goes up must come down, but we don’t see the housing market falling any time soon. The days of homes selling within hours for more than the asking price are behind us. Houses are staying on the market longer. Sellers are actually lowering the asking price, but it’s still a seller’s market.
This is because many of the factors that fueled the historic seller’s market are still in place. Supply remains low in parts of the country, thanks to years of underbuilding, a lack of prospective sellers, and investors who scooped up homes to hedge against inflation. Mortgage rates are still low, enticing more buyers to look for homes in hot markets.
At the height of the pandemic, people fled cramped cities for sprawling suburbs where they could spread out and breathe fresh air. This exodus had a profound impact on supply and demand in both urban and suburban markets. With more buyers looking for homes and few sellers willing to part with them, the stage was set. Home prices increased in the suburbs and decreased in the cities.
Now that people are returning to work and businesses are opening, expect to see demand shift again. Analysts at AirDNA predict a 33% growth in urban demand. This will likely be an uneven recovery, with some hard-hit cities taking at least another year to fully recover from the effects of the pandemic. Overall, demand should grow by more than 14% across all markets.
Short-term Rental Potential to Outpace Housing Prices
One of the more surprising notes from 2021 was the fact that short-term rental revenue outpaced housing prices. Over the last year, housing prices increased by nearly 25%. During that same time period, revenue from short-term rentals grew by 35%. We expect to see this trend carry over into 2022.
It’s helpful to remember that short-term rentals include more than vacation homes. The market in some areas is saturated still with prospective buyers who are temporarily priced out of the housing market. They need a place to live and may consider a short-term rental instead of an apartment or other property that requires a lease.
Final Thoughts for 2022
We remain optimistic about the outlook for the short-term rental market in 2022. Whether you’re already a short-term rental owner or are considering buying your first rental home, now may be the right time to get into the market. An experienced agent at OpenAiRE who understands the market conditions can help you find the property that meets your needs.
With a property management company at your side, you won’t even have to think about your investment. Once we source the property for you, our in-house property management team at Open Air Homes will help reap all the benefits of property ownership without the headaches that come with being a landlord. Reach out today to grow your property portfolio in 2022.