STR Data Lab™ by AirDNA

Economic Outlook for Short-Term Rentals - A 2025 Forecast

Dec 5, 2024

Bram Gallagher, Director of Economics and Forecasting at AirDNA, shares insights on the short-term rental market's future. He discusses the bounce-back of the economy, crediting the Federal Reserve's timely actions to stabilize growth. Predictions for 2025 include a modest 4.7% supply growth, with occupancy rates recovering and increasing average daily rates boosting revenue. Gallagher also addresses geopolitical risks and inflation concerns while emphasizing market-specific opportunities in areas like Maui and urban centers.

34:38

Episode guests

Bram Gallagher

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Episode notes

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Quick takeaways

The podcast highlights a significant economic recovery in 2024, marked by improved GDP growth and decreased inflation rates, attributed to the Federal Reserve's rapid interest rate adjustments.

Despite rising interest rates, the short-term rental market is expected to moderate in supply growth, benefiting existing operators through improved occupancy rates and increased revenue per available room.

Deep dives

Balanced Economic Outlook for 2024

The current economic climate shows signs of recovery as supply and demand have recently found equilibrium, which was anticipated in previous forecasts. 2023 experienced sluggish GDP growth and high inflation, but 2024 has already seen improvements, with GDP surpassing expectations and inflation levels decreasing significantly. The rapid adjustments made by the Federal Reserve, particularly the swift interest rate hikes, have played a crucial role in stabilizing the economy. This favorable trend indicates a potential soft landing for the economy, an achievement that has historically been elusive.

Intro

3min

Navigating the Current Economic Landscape

13min

Analyzing Economic Scenarios and Political Impact on 2025

3min

Economic Trends in Short-Term Rentals

13min

Navigating Risks in the Short-Term Rental Market Outlook for 2025

3min

In this episode of the STR Data Lab, Jamie Lane, Chief Economist at AirDNA, sits down with Bram Gallagher, the Director of Economics and Forecasting, to discuss the current state and future outlook of the short-term rental market.

They start by reflecting on their successful prediction from last year that 2024 would see a balance between supply and demand. Discussing the economy's resurgence, Bram details how 2023 was marked by slow GDP growth, high inflation, and recession worries, but 2024 has seen significant improvements in GDP, income growth, and falling inflation. The duo gives credit to the Federal Reserve for its quick rate hikes, which played a crucial role in stabilizing the economy. They discuss the robust state of the economy, with employment growth, stock market highs, and a strong housing market, while also acknowledging potential risks.

They then shift focus to how the current economic environment affects short-term rental investors, predicting higher interest rates for longer and stable, possibly increasing, home values. Supply growth for short-term rentals is expected to moderate, with significant declines in new listings since rate hikes began. For 2025, they foresee a 4.7% supply growth, further reducing in 2026. Performance metrics remain strong, with occupancy expected to recover and ADR increases contributing to revPAR growth. The hosts note market-specific variations, with areas like Maui, Gulf markets, and urban centers like New York seeing dynamic changes.

They also discuss geopolitical instability, inflation risks, and the enduring issue of housing affordability as potential threats to the positive outlook. Concluding on a cautious yet optimistic note, they express confidence in the U.S. short-term rental market's firm footing.

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Connect with Jamie on LinkedIn and Twitter:

LinkedIn: https://www.linkedin.com/in/jamiehlane/

Twitter: https://twitter.com/Jamie_Lane

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Connect with Scott on LinkedIn:

LinkedIn: https://www.linkedin.com/in/sagescott

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