Pocono STR and Vacation Home Real Estate Market Update – Fall 2024

The seller’s market may be over, and a balanced market may finally be here in the Poconos Vacation Home Market. The economic data of the nation’s economy points us to a “soft landing” as interest rates are declining ahead of what is predicted to be official cuts and the rapidly escalating home prices have plateaued. In some sections of the Poconos, final home prices may have even dropped some as demand has returned to a more reasonable level. Tourism in the region has been steady and there is no longer a shortage of vacation home rentals in the area, so balance has returned here too.

Balance Returns to Poconos Real Estate
The once in a lifetime seller’s market post-COVID has subsided and home supply in the Poconos seems to be normalizing. There is still strong demand, many realtors (like me) report being as busy as ever as speculation and aggressive bidding seem to have subsided. Great homes are still selling fast, average homes are taking some time to sell. Homes purchased in the peak of 2021-2022 have held their value but have not appreciated greatly unless the home was greatly improved. Rational behavior seems to have returned to real estate investing and those wanting to sell are having modest success, those wanting buy are having modest success. From my perspective, we are in a balanced market when it comes to vacation home prices in the Poconos.

Vacation Rental Market in the Poconos sees Balance
The Poconos has been a vacation destination for generations. Vacation rental properties have been in the Poconos for generations and renting a mountain house has been in demand for generations. Some things have changed, most notable the technology behind owning, marketing and operating a vacation rental home. Because of this, we can measure and trend all kinds of data which can help us better evaluate the business side of owning a vacation rental property.

Balance has returned here too. Post-COVID, demand skyrocketed as people wanted to travel but were leery of travelling to far or leaving their car behind. Vacation rental homes in the Poconos were a perfect solution. 47 million people are within a 3-hour drive to the Poconos and with a chance to get away from the pressures and grind of daily life, the region saw a surge in demand that has now stabilized, perhaps even softened as more groups (families, friends, special events) are looking to fly, and travel to somewhere else. Travel volume to the region is still very strong, our visitor’s bureau Pocono Tourism Marketing Dashboard shows another strong summer, but the pressure on demand has returned to a more level rate.

Also returning is the last-minute traveler. To the folks that have been around the vacation rental business for a while, a significant number of bookings come within 10 days of arrival, many say 30% of their bookings come this way. It used to be that way, and it seems this too is back to normal. This last-minute booking is because for many, the Poconos is not a first-choice destination. Don’t get me wrong, the Pocono Mountains are a great destination, and those that come here find plenty to do and plenty of reasons to return, but that proximity to so many big markets means that we get a lot of people whose plans to go elsewhere fall through.

This seems to not only be a Pocono thing, but nationally, people are booking last minute everywhere. There’s even a last-minute deal website called WhimStay. For operators, this has put some uncertainty in their operations, and some have responded by lowering prices, some perhaps too early. This has contributed to additional sentiment that the business of vacation rentals is soft. Many of the newer STR operators in the Poconos have not experienced this more competitive market and this has contributed to an overall drop in daily rates. Exceptional STR properties continue to do very well in the Poconos, I see us moving to an 80/20 market where 80% of the STR industry’s revenue comes from 20% of the homes. Those that don’t differentiate themselves seem to not be doing so well today. See Can you Still Make Money with Short-Term Rentals in the Poconos?

Not Everyone is Making Money with STR
Another thing that seems to have changed is the perspective that brings vacation homeowners here. In recent years we have seen a surge of people, many individual investors who find the Poconos as an attractive place to invest. They evaluate their presence here with a business perspective and make business decisions. This differs from earlier generations where most of the owners who rented first bought the home for personal reasons, then decided to rent to pay the bills.

The business-minded investor is more prone to buy and sell based on data and many focus on a short-term horizon when it comes to return on investment analysis. Those that purchased homes intending to rent, then hastily put them on the rental market may have missed the opportunity to refresh the properties and make them more desirable to future guests. If mediocre reviews and low occupancy then follow, that property may be back for sale a lot quicker than usual. Even just a few occurrences of this cycle will have an effect of balancing the market.

The Pocono Housing Market is Now Balanced
Homes that are unique, are well designed and maintained, have strong rental listings (great reviews, good rental history) do sell fast. There are not nearly enough super cute tiny homes and not nearly enough 5+BR super properties. Properties like these are in high demand and sell fast. Properties for sale that did not succeed as STR, and/or are in need of work, most notably 3 or 4 BR on aging septic systems are plentiful and are the ones you see dropping in price.

There is also a regulatory effect where demand, and thus housing prices have dipped in communities and townships where the regulations have turned against STR. A case in point is a community called “the Hideout” in which squabbles over STR boiled over to unrealistic regulation causing a bit of a run on selling. This was covered by the New York Times in an Article called A Showdown in the Poconos Raises Questions Over Short-Term Rentals In the past two years, housing prices in the Hideout have dropped very significantly, some think in half. Tobyhanna Township, a areas once favored by investors has seen a notable drop in interest and therefore in price due to their cap on the number of STR licenses. A study being circulated has sale prices down in Tobyhanna Township by 18%.

Real Estate Commissions
Several changes have been enacted in real estate practice, most notably the way buyer’s agents get paid. Gone is the assumption that sellers will pay for the buyer’s agent service fees. The old practice of splitting the listing agent’s compensation/commission is no longer the standard. The seller paying the buyer’s agent fees is absolutely allowed, but it becomes the equivalent of a seller’s assistance adjustment in the contract. As the adage goes, everything in real estate is negotiable, add the buyer’s agency fee to that list.

As a buyer’s agent I also remind you of another adage: “good service isn’t cheap and cheap service isn’t good.” A superior real estate buyer’s agent is well worth the cost and superior agents go a long way to getting you a good deal, with lower risk than going it yourself. As an analogy, look at the legal system. Would you go into a courtroom and defend yourself or would you hire the most competent, capable and experienced attorney to get your desired outcomes.

What’s Ahead for Vacation Rental Investment in the Poconos?
Savvy buyers still see the Poconos as a place worth considering. The fundamentals are still here, 3 hours from 47 million people, easily reached by driving. A beautiful natural setting with outdoor, indoor and seasonal recreational opportunities spread throughout the region. We have 11,000 hotel rooms and 6,800 licensed STRs, so there is plenty of balance and choice for travelers and 30 million people visit here each year. The Poconos is still viewed as a value destination and there are plenty of options for travelers with limited budgets and there is still a very viable business model serving the budget traveler. There is also a growing luxury market with large homes hosting special events and hosts building repeat business, competing against markets like Catskills, Berkshires, Vermont and even the beach markets. Take a look at Poconos VRO’s STR Economic Impact Report and you will hopefully recognize that Poconos is a place to consider.

If you’d like more information on Short-Term Rentals in the Poconos:
A webinar called How to Feel Confident Purchasing STRs in the Poconos
A Podcast called Mastering the Poconos Market in Short Term Rentals

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