Airbnb Houses Are About to Flood the Market
John Rubino
 New players will make this housing bust one for the record books
The current housing bubble features three new players, all of whom are about to switch from “buy/hold” to “panic sell.” They are:
- Boomers forced by declining health and/or shrinking stock portfolios to sell their McMansions.
- Wall Street private equity “landlords” who gorged on houses and apartment buildings (sometimes buying up entire neighborhoods at above-market rates) forced by the coming recession to shed massive amounts of inventory.
- And — the subject of this post — Airbnb landlords who discover that their rosy cash flow projections were fantasies. Many will have to liquidate their portfolios to avoid bankruptcy.
From today’s Zero Hedge:
Shares of Airbnb plummeted in premarket trading in New York after the company reported disappointing second-quarter earnings, falling short of Wall Street's expectations, and issued a warning about slowing demand from US vacationers. This development comes amid rising recession risks in the US, with the consumer downturn worsening for the working poor and middle class due to elevated inflation and high interest rates.
Airbnb warned that it is "seeing shorter booking lead times globally and some signs of slowing demand from US guests."
In a consumer downturn, vacation spending is some of the first discretionary spending households cut to preserve cash. The problem is, as we've already cited numerous Goldman notes, explaining low/mid-income consumers are under severe financial stress. Airbnb's earnings and dismal outlook are ominous signs that the consumer slowdown will likely worsen through the end of the year.
Airbnb's shares plunged 15% in premarket trading early Wednesday. If the intraday declines exceed 16%, shares would record the largest-ever intraday decline.
Airbnb's earnings report just confirms that the consumer downturn theme is gaining momentum.
It's only a matter of time before Goldman tells clients to start shorting stocks with exposure to upper-income folks. The bank's analysts have already told clients to short companies with low/mid-consumer exposure.
Here’s Where It Gets Interesting
As these three new real estate players (Boomers, private equity, Airbnb landlords) start selling, they’ll be confronted by potential buyers who simply can’t afford anything at current prices. See Housing is Seriously Rolling Over.
That’s when the panic selling erupts, as property owners try to get something, anything for their rapidly depreciating assets. You can bet that as this is written, they’re watching Airbnb’s stock and formulating plans to get out while the getting is, if not good, at least possible.
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DollarCollapse.com is managed by John Rubino, co-author, with James Turk, of The Money Bubble(DollarCollapse Press, 2014) and The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.
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