Pocono STR and Real Estate Market Update – Winter/Spring 2024

Here some insight on the vacation home rental market and investment outlook for short-term rental properties in the Poconos for 2024. Overall Poconos home sales are down, home sale prices seem stable, total rental income is down slightly, and rental stays (nights booked) are holding steady. When it comes to homes for sale, we are seeing a bifurcated market with some homes selling in 5 days, and others selling in what seems like 75 days. This seems fueled by several factors:

• Fundamentals for Pocono Vacation Rentals remain strong: While 2023 saw a rise in air-based travel for many families, the fundamental geographic advantage of the Poconos remains, 47 million people live within a 3-hour drive, and nearly 70 million people live within a 6-hour drive.
• Competition has Increased: The number of listings on AirBnB and VRBO continues to rise, available nights are at an all-time high.
• Resort Expansion: A significant expansion is wrapping up at the Great Wolf Lodge and Camelback keeps growing are examples of resort investments in the region. See more highlights of tourism news from the visitors bureau.
• Residential conversions increasing: Homes occupied by full-time residents are also on the rise as a steady flow of people are moving to the region. With I-84 connecting to the northern NYC suburbs, I-80 connecting to the western NYC suburbs and I-476 connecting to the Lehigh Valley and Philadelphia, the region is experiencing some suburban sprawl. Vacation homes can be purchased for a fraction of the cost of an equivalent suburban home in these metro markets, and worth the commute for a growing number of people.
• New Construction not enough: As you drive around, you can see a reasonable amount of new construction with some spec houses coming to market, but we are far from seeing a building boom. A couple of residential communities are under construction, but these are not STR-friendly. One new vacation community is under way by Lake Harmony, the 12-unit Laurelwoods III project ($700K base model).
• Demand for Turnkey STR properties remains VERY strong in the Poconos: Those with an investor mindset seem to still be looking to acquire additional properties for their portfolios.
• Rehab Market is Sluggish: Many of the would-be investors in the region state they are hesitant to trust local contractors and these buyers lack their local resources to get things done. Small, understaffed municipalities are also cited as causing uncertainty with potential delays in response time and a general resistance to change. As with most places in the country, the Poconos does have a short-supply of quality contractors that are readily available.
• Prices Remain Stubbornly High: We are still feeling the effects of 2022’s “bonkers” market when any home listed for sale would generate multiple offers, over list price waiving appraisal contingencies. People listing their homes for sale in 2023 have been using last year’s pricing as this year’s baseline and as a result, list prices haven’t budged.

Combine these and for someone with a long range vision, there are plenty of opportunities to do well in the Poconos.

For some Pocono vacation rental operators, the year has been just fine. Properties that are bigger and loaded with amenities in resort-like communities are doing quite well. If your place has 6 or more bedrooms, is located on 5 or more acres and/or is waterfront or has a pool, the rental business in 2023 has been very good. If your property doesn’t stand out, is modestly outfitted or is a bit dated or even shabby, 2023 has been a tough year. Many of those that have had a tough time drawing guests have reverted to discounting, dropping your nightly rates (ADR) to meet your occupancy goals. That in turn challenges your profitability and depending on your borrowing costs, things might look grim. That in turn has put some downward pressure on the overall average price in the region, you can see that reflected in statistics reported by the Pocono Mountains Visitor’s Bureau. Visit any of the many rental owner Facebook groups and you can see this firsthand with people who have plenty of time to complain, but not time to turn things around.

Shabby ain’t Chic here in the Poconos. Shabby may be Chic in some places, but when it comes to vacation homes, today’s guests seem to want new and improved. To command a premium price, a property should have a fresh look, an inviting theme and aspects that set it apart from the pack. With more than 7,500 vacation rental homes in the area, competition is strong and high ADR goes to standout listings. The Poconos has been known as a value destination and for the most part that still holds true. I’ve heard some investors call the Poconos “the poor man’s Smokies” and when you look deep at the Airbnb listings, you might think this is still true. On the other hand, I do think we are headed to an 80/20 market where 80% of the vacation home revenue comes from 20% of the vacation homes as more people find success in building their properties into micro-resorts.

This is playing out in the resale market. At the end of October, there are only twelve properties for sale with 6 or more bedrooms from the almost 600 for sale in STR-friendly communities. I believe this is because the better earners are being booked and the weaker ones are for sale. This ties back to the original statement that homes selling either in 5 days, or 75 days. If the home is “Turnkey STR” being recently renovated with standout design and features, with a current STR license, with a good rental history, great reviews and a ROI confirmed by a third party like AirDNA, it will sell in 5 days. If, however, the home failed to succeed as a STR, needs work and/or is in a less than ideal location and is priced based on last year’s market, that home will sit, unsold. It will take a couple of significant price adjustments to come down to today’s buyer because today’s buyer is savvier.

If you are patient, if you have a desire to develop a successful STR then there are good opportunities all over the Poconos. The vacation home market in the Poconos is in a modest correction and that means that prudent strategies with a long-term perspective may bring long-term gains, not only from profitable operations, but capital appreciation as the overall fundamentals are pointing to vacation rentals becoming rare and in high demand.

NOTE: Much has been written, especially in the Facebook Groups over the tide or short-term rental regulation that has swept the Poconos. Moves to restrict or prohibit vacation rentals has prompted the formation of a regional rental alliance called the Poconos Association of Vacation Rental Owners. With backing from the Pocono Mountain Visitors Bureau, property managers and a growing number of owners and affiliated supporters PoconosVRO is a collective voice of the Poconos STR Industry and sees vacation rentals as vital to the region’s tourist industry. There’s a long way to go and we welcome your support, donations and endorsements to help us get there.

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