I’m Joe Gerrity, local businessman, investor and Real Estate Broker. For my Yo Joe! column, I’ll be answering your real estate questions and providing market information special to New Orleans.
New Orleans has seen an explosion in short-term rentals in recent years. In fact, an estimated 8,500 units were in operation until restrictions were passed in 2019. As COVID-19 continues to shake the real estate world, Airbnb units seem to have found a new home in the long-term rental category. To test this hypothesis, we dove deeper to find out just how much the rental market has changed.
In order to paint a better picture of the changes in the real estate market, we compared the year-over-year percent difference of new furnished rental listings each month for the last five years. We wanted to see if the historical data supported our gut feeling that there was a significant increase in the number of furnished rental listings on the market – mostly coming from Airbnb – since the stay-at-home orders were put into place.
Our first step was to analyze the data of furnished rental listings since 2015 that were input on the MLS. We observed that the largest percent change prior to COVID-19 was a 78% increase in furnished rental listings when comparing October 2016 to October 2017. There were three other notable changes since the first month of 2015: June 2015 – June 2016 (56% increase), February 2017 – February 2018 (54% increase) and November 2018 – November 2019 (54% increase).
In March 2020, however, when the stay-at-home orders were put into place, we saw a 246% percent increase in furnished rentals. The actual number of new furnished rental listings increased from 56 in March 2019 to 194 furnished rental listings in March of this year.
By comparing the actual change in number of new listings year-over-year by their respective month, we can understand how significant that 246% increase is. March 2019 vs. March 2020 saw an increase of 138 new furnished listings. This is more than 5.5 times than the highest ever change year-over-year since January 2015. The previous high mark of change was 25 new units, which happened only twice.
In other words: Furnished lease listings, once listed as Airbnb, are flooding the long-term rental market.
The experts at Satsuma Realtors are monitoring new data around the clock. In fact, some of our realtors are experiencing the effects COVID-19 has had on their own investments first-hand. I have invited one of Satsuma’s top agents, Jenny Meserole, to help us interpret recent changes in the rental market. With family ties here dating back to the mid-1800s, Jenny Meserole is a born and raised New Orleanian.
In addition to working with Satsuma Realtors, Jenny owns Carriage House Concierge, a concierge property management agency. Her real estate credentials, expertise and two decades of experience in the field naturally evolved into the management side of her client’s properties and investments. Satsuma is proud to have her on our team!
Thanks for joining us, Jenny! Let’s get started:
You manage a number of number of short-term and long-term furnished rentals. How has that market been impacted so far?
There are more furnished rentals on the market than we have ever seen in Orleans Parish. As of right now, we have 348 furnished rentals listed on the MLS. In January, we had 170 active furnished rentals. We’re seeing 2 to 3 times more inventory in New Orleans than we’ve had over the past five years.
Are you seeing a lot of short-term rental (STR) properties convert to longer-term rentals?
Yes! One of the benefits of investing in real estate is its flexibility in use during changing markets. 25% of our short-term rental clients are now utilizing the MLS to advertise their properties as long-term furnished rentals to offset their loss of STR income due to the coronavirus pandemic.
Prices seem to have dropped considerably on the major vacation rental sites. Is that consistent with what you’re seeing?
We have seen reservation cancellations in March, April and May. Fortunately for our owners, Airbnb is now refunding a portion of those cancellations back to the host. Because there isn’t travel demand at this time, we haven’t adjusted pricing. Our future bookings are still strong, with high occupancy rates through the end of the year. In the coming months, we will have a better gauge on market demand.
Who is occupying STR properties right now?
We are renting to traveling medical personnel and long-term tenants.
What recommendations would you have for people who own short-term rentals?
Hang in there! Travel to New Orleans will resume. In the meantime, renting to long-term tenants or offering monthly rentals to traveling medical personnel are good options. Utilizing a savvy and well-connected property manager is always beneficial when the market is competitive. Our network of medical recruiters and real estate agents help to fill our properties when we have low occupancy rates. The SBA and most banks are offering loan products to help bridge the financial gap from the impact of coronavirus.
Are there any potential upsides to this from the perspective of the STR owner, be it in the form of disaster loans, cheaper acquisitions or something like that?
We are hoping that the demand for vacation rentals will increase in the very near future, as major events and travel resume. Between the change in STR regulations and the non-essential travel ban, many people don’t have confidence investing into the STR business model at this time. It’s been a challenging year for many investor clients due to these unprecedented events.
Any other comments you have on COVID-19 and its effect on the real estate market?
We have yet to see the true impact of the coronavirus pandemic on the economy and the real estate market; it will be clearer in the coming months. Stay ahead of the curve and explore your options. Remember: the team at Satsuma Realtors are here to help you! We are ready to offer our expertise, knowledge and experience to assist our clients in navigating the changes that may impact their real estate needs.
The Yo Joe! Real Estate Column is made possible by Joe Gerrity and Satsuma Realtors. To find out more about them, visit wesellnola.com.