Much speculation arose from the 2020 coronavirus outbreak (COVID-19) and travels to the state of Florida. Thousands of vacation home rentals managers, hosts, and owners have wondered how to handle this situation professionally and with compassion. We have compiled an informative article on the effect of Covid-19 on vacation homes during this period.
Orlando Vacation home rentals, such as those available through Airbnb and VRBO, as well as through hotel chains, have been ongoing since the epidemic began in early March. Although holiday cancellations and short-term rentals slated for the months of March and April in 2020 have risen, in Florida, many short-term rentals have been advertised and reserved as ideal places for housing or self-isolation, or have become much-needed housing for the necessary staff.
The mandate required that any vacation home rental during that time cease to function. This put vacation home rentals managers and renters in a difficult position. New rentals were not allowed, meaning hosts now had a 25% reduction in revenue in the next months. Hosts depended on rental income to cover property costs, such as property taxes, insurance, and mortgage payments. The mandate warns,
People who break the rules will be prosecuted, including the potential cost of second-degree violations and the possible revocation of vacation rental permits
Florida currently has under 6,000 new cases as of this publication due to the combination of the election and holidays.
Impact of COVID-19 on the Orlando vacation rental market:
Vacation home rentals sales continued to decline in 2020. Orlando Vacation home rentals sales declined in mid-March, when most countries were quarantined with the rapid growth of the coronavirus. For the vacation rental market, this meant that the number of homes sold were be temporarily reduced.
There is a list of reasons that push people to buy or sell their vacation home, even in uncertain times such as: birth, death, marriage, divorce, etc. Sometimes people have to change their life situation regardless of market time. The fact is that life continues in the midst of a global pandemic. The number of vacation homes sold in the past during the quarantine had slowed.
Rental Price Growth is Slow
Spring is usually one of the busiest seasons for Orlando vacation home rentals. Not in 2020. The CoreLogic Property Price Index estimated an increase in annual property prices of 0.5% from March 2020 to March 2021. A year ago, from March 2019 to March 2020, vacation home prices increased at an annual rate by 4.5%. This is clearly a great reduction in the growth of internal values.
Short-Term Deflation, Long-Term Inflation
The government has printed billions of dollars since the coronavirus covered much of the country. Many companies and workers affected by the pandemic receive postal checks in the mail to compensate for the loss of earnings and income.
There was a short-term deflation because demand had decreased significantly in many sectors: empty seats on planes, new cars filling parking spaces, etc. Demand will increase slowly and we can see inflation in the coming years.
“Lost Generation” May Bring More Renters
While the coronavirus has not put most of us in an ideal situation, landowners should benefit from it, because this next generation will likely be a tenant longer than usual. Thanks to COVID-19, we expect real estate investors to have more tenants in the next decade.
What About Rental Prices During a Recession?
While there shouldn’t be a major recession in the vacation rental market, the recession often leads to fewer people looking for homes. If demand decreases, house prices decrease. So far, we have seen a sharp drop in appreciation, but a much smaller drop in overall vacation home rentals prices. When or if property prices drop, it’s generally a good time for vacation home rental investors to find great deals.