Pandemic Boom Towns Teetering on Housing Bust

Some of the hottest housing markets to emerge from the pandemic are beginning to show signs of a shift. A plummeting Airbnb market and skyrocketing prices could be contributors, according to Reventure CEO Nick Gerli, who appeared on CNBC’s  “Last Call” with Brian Sullivan.

Housing inventory in Austin, Texas, for example, has reached record levels while inventory in Jacksonville, Florida, has surged more than 300% over the past 3 years. These and other markets attracted not only new residents during the pandemic thanks to looser business and social distancing restrictions but also investors looking to cash in on the rental market.

“The Airbnb crash is certainly something that’s playing into the rising inventory that we are seeing in Texas and Florida,” said Gerli. “But I think this is a broader macro trend. These pandemic boom towns just got way too expensive over the last two or three years.”

Gerli said some markets are now 40% overvalued and as inventory levels spike, prices are coming down, a signal the market is shifting particularly in Texas and Florida, as well as Tennessee and Arizona.

Sullivan likened Austin’s real estate market to the NVIDIA of homeownership, noting its parabolic rise during the pandemic and a perception that it would never come down.

“I was actually one of those people who moved to Austin in 2020 and 2021, so I saw it firsthand,” said Gerli. “Prices there went up 50% to 60% in two or three years, and now they’re almost down 20% already. Austin is a market that’s legitimately crashing.”

The telltale sign of a broader market shift is the inventory figures, he said. Lots of investors are now selling, and there is a huge homebuilder pipeline that is still to be delivered over the next year.

In addition, many homeowners are being forced to sell their homes, particularly in Florida, because of skyrocketing insurance and HOA fees, said Gerli.