Pocono STR and Real Estate Market Update – Summer 2023

Here’s some insight on the vacation home investment market in the Poconos, for Summer 2023. Inventory remains tight for very desirable homes; prices remain high, and we continue to see people moving into the area taking advantage of the quality-of-life benefits of the region. From driving around, I see what appears to be a strong new construction market and as a realtor who focuses on vacation homes that can also be used as short-term rentals, I continue to get a steady stream of inquiries asking about vacant land for building as well as homes for fixing up. So, from my perspective, the real estate market in the Poconos remains stable and strong as we hit the middle of 2023.

Fears of an Airbnb Crash in the Poconos?

I have been receiving a lot of calls from prospective clients who have read or watched videos of prognosticators who are predicting that there is a bubble about to burst in the short-term rental market. Some go as far as to predict a collapse in real estate prices and surge in inventory in what they predict will be the AirBnB Crash. It is certainly true that the number of AirBnB listings has soared over the past few years and the number of small business STR businesses has risen dramatically in the Poconos, but to me this is more of a shift in ownership perspective than any rapid pivot in the Pocono housing market.

When looking at the trends, it is also important to look at the history. Much of the Pocono region was developed as a place to vacation. Many of the communities were designed around man-made lakes and contain amenities such as pools, clubhouses and a few even have golf courses. They were marketed to those living in the nearby metro areas of New York City and Philadelphia as a place for a second home and a place to get away from it all. Homes in these communities were often rented for vacationers and the reputation of the Poconos as a regional escape grew. Most of the real estate agencies in the area had a vibrant rental business and that fostered the steady growth of a tourism industry. Vacation homes are a big part of what brings people to the Poconos.

With the rise of websites like AirBnB and VRBO, a new type of owner/investor came to the Poconos and purchased vacation homes and turned them into full-time rentals. This trend had started prior to the Pandemic and those that were able to take advantage of the huge surge in demand during the Pandemic did very well financially. Demand during 2020 and 2021 was so strong, that almost anything that was listed on the rental sites was rented. If there was a bubble, we saw that bubble deflate some in 2022 as demand started to return to more rational levels and rentals coming from the booking engines returned to vacationers and tourism and not people fleeing a Pandemic.

More Second Homes Converting to Vacation Rentals in the Poconos

I can’t speak to what is happening in other parts of the country, but here in the Poconos, the rise in the number of listings in the booking sites, this wasn’t from a surge in residential homes being converted to short-term rentals, it was a transition of second homes shifting from being occasionally rented to investor-owned vacation rental homes that are now available 12 months a year. It is a rise in room nights available, not a rise in the number of properties available to rent from what I can tell. When it comes to the real estate market, demand in the Poconos area remains strong and there is a lack of suitable housing. Pushing demand here are new residents wanting to come to the area and live full-time which is, and in my opinion, will drive a continual risk that the Poconos will be consumed by suburban sprawl.

Poconos is Not Just Vacation Homes

Yes, there is some new construction, but the pace of new construction seems to be not meeting demand for single family homes for full-time residents. Gone are the days when a new subdivision of 500 homes will be built, we are in a market where homes are being custom built and, in a few cases, some spec houses being built. Much of the building is happening in the vacation communities on lots that were sold generations ago and never developed. The new occupants are people who have decided to leave metro areas and come live in a mountain setting. The long-term rental market is also driven by this same urban flight.

Poconos Returns to a Competitive Vacation Home Market

Back to the STR market, it seems the rise in investor-focused vacation homes has hit a point of saturation, where the demand for rentals is below supply and we have seen some significant price pressure on the room rates and occupancy in the area. From the numbers that we get from the tourism bureau dashboard, the number of rental nights remains high, but we are seeing weakness in rates, both with STR as well as with hotels. I see this as normal market activity, a boom and bust cycle on the surface, but normal supply and demand as would happen in any type of market. Those that operate great properties and have customer focused operations will continue to do well. Those that thought that buying a property and listing it on AirBNB is a path to quick riches will not do well right now.

Poconos Remains a Good Place to Invest in Real Estates

Because the Pocono real estate market has many different, and in some cases, opposite dynamics, it is important to remind yourself of the fundamentals before considering buying or selling. The Poconos lies withing 3 hours drive to 47 million people. It is a nice place to live, work, run a business or visit. People have and will continue to want to get away for a vacation and engage with our ski resorts, water parks, outdoor attractions and the natural beauty of our mountains, lakes and rivers as neighbors or visitors. Second homes should continue to be desirable and may even become more desirable in the future. To those looking to benefit from panic selling, I don’t think you are going to see that in the Poconos. There may be a market correction where some STR properties convert back to second homes, or to primary homes and LTR for investors, but I don’t foresee that resulting in much of a price shift. For those that are interested in the long-term benefits from real estate, it might be a good time to consider the Poconos.

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