Thoughts on Vacation Markets w/ rising rates/economic slowdown?

[Richard E.]

Hi all,

I am a little curious what veteran STR people think about the current market- specifically, VACATION ONLY MARKETS. By vacation only markets, I mean places where basically nobody is moving for a primary residence, and prices are totally driven by vacation rentals.

My actual example: I am looking to buy a place near yosemite National Park, offer is about to be accepted. The facts are these:

----I am being quoted over 6% for 2nd home/10% down loans, which I have used in the past to buy STR Properties;

---Rates for 20% down loans aren't tons better; 

----House Prices are through the roof, all time highs

----Every house in this market is being bought as an STR (meaning this market is not a primary home buyer market/people are not moving there to live, prices are driven solely by STR buyers)

I am just wondering if the veteran STR investors are shying away from these types of vacation only markets, due to the rise in rates and prices, waiting for those markets to cool off (since it seems like they should, since STRs will be making less and houses and loans are harder to get- or if people are still just going on with business as usual buying STR's in places like gatlinburg, port st joe, etc. (e.g. places whose prices are driven solely by STR sales) with prices and rates as high as they are, and assuming it'll work itself out.

I am balking a little at my decreased ROI I guess, and wondering if its smarter to hedge ones bets in a market with a better exit strategy - maybe a market that isn't quite as lucrative on the STR side, but is a real housing market where people actually want to live also. (like Orlando, maybe joshua tree) This way if STR buyers dry up, the market will still hold its value.

Just curious what the bigger STR people are thinking on these sorts of "vacation only" STR markets, as I find myself doubting them a little. Mainly because, if I am doubting them for myself, then I figure so might other STR investors be, and therefore, since these markets are dependent upon STR investors to continue to drive prices, then demand is going to dry up and prices will come down.

hope i made sense. its kind of late for me- any thoughts/opinions appreciated.