The Airbnb Backfire

Vacation homes that surged in value during the pandemic boom are suddenly hard to sell as the short-term rental craze cools and borrowing costs rise. Properties that once sparked bidding wars now sit months or years on the market with repeated price cuts - one Gatlinburg cabin listed at $850,000 in 2024 is now below $600,000 - while Big Bear Lake values are down about 20% from their 2022 peak. Buying frenzies in 2020-22, fueled by low rates and booming Airbnb/Vrbo demand, left many owners and small investors exposed when occupancy growth plateaued and nightly-rate competition increased. Owners who counted on quick flips or steady rental yields are confronting higher mortgage rates (above 7% for many) and mounting upkeep and tax costs, while personal use wanes as life returns to normal.

Data and agent experience show a modest but meaningful shift: vacation homes are slightly more likely to see price cuts than other listings, and resort hotspots such as Destin, the Florida Keys, the Smokies, and Palm Springs have elevated shares of second homes for sale. Investors are revising underwriting: a common “10% rule” for annual revenue versus purchase price has given way to 7-8% expectations, knocking potential buyers out of deals and lengthening time on market. With inventory swelling in coveted price bands, buyers increasingly wait for reductions and sellers must temper ambitions or accept lower-than-expected proceeds.