All Forum Posts by: John Carbone

This is my thinking as well. In the Short term rates may rise, and we could see a small correction in asset prices, but then they will just go back to the fed playbook and lower rates again, and maybe even lower this time (think Japan and 1 percent mortgages) because realistically they can’t raise rates long term.

I don’t really see a deflation environment (maybe very short term) but I just don’t see it. Minimum wage is now officially $15 and that is not being taken away from people. Covid pretty much did what congress always wanted to but couldn’t pass. The market has now set that. Good luck in a year finding people to work the jobs they currently make $15 at doing it for $8-$10, the labor shortage will be even more ridiculous than it is now. 

The smoky mountains seem safer in this scenario because not many vacation destinations appeal to virtually every income earner. Everything is concentrated in a few areas and people can spend as much or as little as they want and they can still get an experience and a vacation. You can have a 1 bedroom cabin in the same area as a $500 4 bedroom cabin and people aren’t sacrificing safety/area for it.  

Ok that’s what I was hoping to find out. That’s more encouraging to hear that people were still booking out in 07-09.

so it would likely need $130 a barrel oil, 20% percent reduction in stocks, and 10 year treasury closer to 3 percent to likely have an impact in the Smoky market. 

I am hedging my short terms with Oil stocks, it’s great to have real estate and equities at all time highs, and even the oil stocks are taking off too. Enjoying this ride for sure, just hope it keeps on churning. 

that’s a great idea. I think on Airbnb you can do filter searches based on “ev charger”, with the new incentives in the projected infrastructure bill there will be more and more electric on the road. 

so does this mean that the smoky mountains are more recession proof than other short term rental markets? 

I’m not looking for confirmation on something that is mathemically accurate. When someone makes a claim that “a fact” isn’t accurate when it is with no basis to back it up, I’ll defend the logic. 

 I’m looking for information from people who have been around this type of environment to weigh in how this effected the short term rental markets.

You say $4 gas in 2007 isn’t the same as it is now. Can you elaborate on that? What price per gallon would equate to how it was in 2007? 

Point of discussion is, how high will gas prices need to go to have an impact and how high will interest rates need to go to have an impact. 

Why is it different this time? I don’t know that answer. 

The only thing that matters is monthly payment for the vast majority of people. Interest rate is the key variable. 

1m @ 3% = $4,216

885k @ 4% = $4,225

788k @ 5% = $4,230

And it goes on and on, with each 100 basis points equaling an approximate 10 percent decline in the asset price to keep the payment the same. 

There’s no way at $8 a gallon that there will be no drop in demand on $400 rentals. Your assumption is that life goes on as normal for everyone. Even if just 10-20 percent of people change behaviors it has a ripple effect throughout. When contractions occur people look for substitutes. Luxury items and vacations are the first things people cut back on. Maybe they go on 1 or 2 vacations instead of 3 or 4 in a year. But when this happens demand drops and people will have to cut prices, so those $400 nights might become $300 or $200. 

Interest rates matter, gas prices matter, real estate and stock prices matter (wealth effect and consumer confidence), discretionary income matters. 

Interest rates are also increasing. Historically every 100 basis points represents a 10 percent move in real estate. What’s the continued bull case? I’m struggling to find them, all I see are headwind after headwind. 

And yes, $1 a gallon more is just x more, but at what point does that extra dollar become significant. $2 to $3, $3 to $4, $4-$5 etc, eventually it matters. I think $4 gas pricked the economy last time. 

Gas prices are really starting to accelerate with the national average at $3.40, which is historically very high. Oil is only just over $80 a barrel, and I believe $150 a barrel was the ATH several years ago. GDP only came in at 2 percent and we still have revisions that are expected to be below 1 percent when it is finalized, and this despite all the liquidity injected into the market.

my question is, high gas prices impact short term rentals especially in the panhandle and Smokey mountains. These markets are on fire and at all time highs but headwinds look extremely bleak and reminiscent of the cold winter from 2008. How are you all feeling about this, is this just FUD?

The data seems to show that we are at the beginning of a potential long period of stagflation reminiscent of the 1970s. 

Thanks Mitch, that was my understanding as well. I will seek out a CPA for official guidance, but I wanted to have some information beforehand.