As we enter 2023, the real estate market in the Poconos remains vibrant and there is some good news for buyers. Inventory is twice the level it was a year ago, prices seem to have stabilized (plateaued?), and sellers are becoming a lot easier to work with. In my opinion, we are still in a seller’s market, but we are slowly seeing some balance. New properties continue to trickle onto the market, breaking the myth that Pocono Real Estate is closed for the winter. New listings are coming from sources like delayed rehabs, deals that fell apart due to financing and estates, see my STR Hot List for some examples.
The increased cost of borrowing has pushed many first-time buyers to the sidelines, but it seems the rates are not rising as fast as other costs in today’s economy. Portfolio investors and cash buyers are now in a very good position to move quickly through the sale process. Due to real estate prices stabilizing, the appraisal gap that has been daunting borrowers seems to have passed and it is not so uncommon to see appraised values exceeding sale price. The high comps might be a factor in holding prices steady in the near term. We still are seeing strong investor interest in STR in the Poconos, so demand should also keep prices holding mostly steady.
Overall, the STR business is very strong in the Poconos. New operators continue to come online and the rise in available rooms is helping keep vacation costs manageable for guests. Gone are the days, fueled by COVID fears, where anything will rent; you must work for it today. The days of putting just anything on Airbnb and getting guests have passed us and that seems to be helping the supply of homes. I have seen several prospective STR’s that are now for sale due to the owner misjudging the amount of work needed or the amount of time and money necessary to operate a successful STR. Running a STR is like running a hospitality business, you can find good property managers and co-hosts to help, but for most, STR requires active, not passive invest.
The regulatory environment continues to tighten with several townships in Pike and Wayne counties implementing new STR ordinances and Tobyhanna Township rolling out its licensing process. Some community associations have proposed putting caps on the number of vacation rental units, but these seem stuck, not to be getting enough homeowner votes to pass. Level heads realize that collectively STRs:
- pay more fees into HOAs and help defray costs for residents.
- increase area home values.
- renovate and improve homes and focus on curb appeal.
- by definition are small businesses that increase economic activity which can benefit the region as a whole.
While individual STRs compete for bookings, owners who rent have a lot in common. There are Facebook groups for owners and private, community-focused private groups in most neighborhoods. Working with your competitors on big picture issues is just good for business, it is a good idea to network with others in the STR business. Collective action is helpful and ultimately in your best interest.
A local property management company has a nice market summary which is worth reading. See Pocono Rentals and Management’s 2022 Year-End Review and 2023 Roadmap. When you look at the number of new properties listed as STR, you might be shocked at first. It bears repeating that the vacation home rental market is steadily going through a transformation away from listings being marketed through local relators toward listings being posted on booking engines like Airbnb and VRBO. Licenses are a relatively new source of data, so the number of vacation homes that rented was never easily tallied before regulation. It is also worth noting there is a lag in the time that it takes to apply for a license and then pass through the approval process. There is likely a parallel story between this transformation (Vacation homes that rent compared to STR) and the ongoing Uber versus taxi story happening in the transportation industry.
If you are interested in meeting others involved in Pocono vacation home investing, check out a Pocono Lake Real Estate Investing Meetup Group, perhaps we’ll meet there sometime.