MORE Airbnb taxes in California?

It’s going to be a great day! Well, unless you live in California. Let's dive into today's top stories:

• California is considering a new tax on short-term rentals 🏠

• Real estate economists predict a housing market correction 📉

• The Metaverse is set to revolutionize the real estate industry 🌐

• 🔥 Deal of the Day! 🔥: 3 bd | 3 ba | Heathsville, VA

California's Golden Opportunity or Golden Problem? 🌴

Real estate investors, it's time to keep a close eye on the Golden State. California's legislative body is mulling over a new tax on short-term rentals, such as Airbnb and Vrbo, with the aim of funding affordable housing initiatives. This move comes amidst a housing crisis in the state, exacerbated by supply-demand imbalances and affordability issues.

State Senator Monique Limón, the bill's sponsor, has been vocal about the need for funding to build affordable housing. The bill, known as SB 584, has already passed the California Senate but needs a two-thirds approval from the state Assembly to become law.

The proposed tax is set at 15% on the rental price for short-term rentals, those rented for less than 30 days. If passed, it would come into effect in 2025. The tax is expected to generate around $150 million annually, which would be used to create affordable housing for lower and middle-income Californians.

However, this tax would be in addition to existing city and county occupancy taxes, which currently range from 10-12%. This could potentially strain owners of short-term vacation rental units, who need to keep their rates competitive with California hotels.

Critics argue that such a tax could harm California's tourism industry. Companies like Airbnb and Vrbo would prefer alternatives to their hosts paying additional taxes.

The housing crisis in California is a well-documented issue. According to the Public Policy Institute of California, 30% of all people experiencing homelessness in the United States resided in California last year. The National Low Income Housing Coalition confirms that high rates of homelessness in the state are due to a significant affordable housing shortage.

To afford a two-bedroom rental home at fair market rates in California, a family would need to earn about $81,133 a year. However, a low-income family of four in the state typically earns a maximum of about $29,350 a year. There's a shortfall of nearly a million homes needed to house low-income families in California.

Adding to the homeownership challenges, State Farm and Allstate recently announced they will no longer issue new home insurance policies in the state. This could impact already high prices for housing and home insurance.

In a recent survey by the PPIC, one in three Californians said that housing costs would make them "seriously consider moving out of the state." IRS migration data corroborates this, showing that in recent years, California has lost residents and billions of dollars to states with lower taxes and a perceived lower cost of living.

As real estate investors, it's crucial to stay informed about these developments and understand their potential impact on your investment strategies.

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Crash or Correction? The Future of Housing Prices 📈

Despite the current turbulence in the housing market, a crash in housing prices is not on the horizon, according to leading real estate economists. Instead, we're witnessing a market correction. Sales may be down and mortgage rates up, but home prices continue to climb due to the scarcity of homes for sale.

At a recent gathering of real estate journalists in Las Vegas, Selma Hepp, CoreLogic's chief economist, stated that she doesn't foresee home price declines on a year-over-year basis nationally. She predicts a 4% increase in home prices for 2023 compared to last year. The National Association of Realtors offers a more conservative outlook, projecting a 1.8% increase this year and 2.8% next year.

However, rising prices are a double-edged sword. While they benefit sellers, buyers, especially those already struggling with affordability, are faced with higher home values and increased mortgage payments. Zillow's Chief Economist, Skylar Olsen, revealed that the average U.S. homebuyer now needs to spend almost 38% of their income on house payments, up from 27.1% in December.

The housing market is also impacted by the broader economic landscape. Richard Barkham, CBRE Global Chief Economist, predicts a "mild recession" in late 2023, with the gross domestic product dropping by less than 1% next fall and winter. Ted Jones, chief economist for Stewart Title, anticipates that the Federal Reserve's plan to curb inflation will raise the unemployment rate to 5-6%, resulting in a loss of 2.8 million to 3.9 million jobs.

Despite these challenges, the housing outlook is expected to improve for sellers due to a limited supply of new listings and easing mortgage rates. Joel Kan, deputy chief economist for the Mortgage Bankers Association, predicts that rates for the 30-year fixed home loan will fall to 5.6% by the end of the year, averaging in the low 5% range in 2024.

In the commercial real estate sector, values have been dropping steadily over the past 18 months, particularly for offices. It's estimated that it will take two to nine years for building and warehouse values to return to 2022 levels. This creates some risk for banks holding real estate debt, with an estimated 311 banks likely to fail in the near future.

In conclusion, while the housing market faces challenges, a crash is not expected. Instead, the market is undergoing a correction, and the future will likely see a return to long-term trends in home price appreciation.

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The Metaverse: A New Frontier for Real Estate 🌐

The digital and physical worlds are merging to create a new reality - the Metaverse. This virtual reality, crafted by tech giants like Facebook and Google, is set to revolutionize how we interact with real estate. The Metaverse is still in its infancy, but it's already hinting at how it could transform the way we buy, sell, and engage with real property.

The Metaverse is a shared environment where users interact in real-time using avatars and other digital representations. Businesses are increasingly interested in Metaverse development services, which typically involve creating virtual worlds for various purposes, including gaming, education, social networking, and commerce.

The real estate industry is one sector that stands to be significantly impacted by the Metaverse. Virtual property tours, higher engagement, improved collaboration, enhanced data analysis, and lower costs are just some of the benefits that the Metaverse could bring to the real estate industry.

Virtual property tours allow potential buyers to explore properties in a more engaging way. Instead of static images and videos, buyers can use virtual reality headsets to walk through properties as if they were physically there. This is particularly beneficial for overseas buyers who may not be able to visit properties in person.

The Metaverse also offers higher engagement compared to traditional listings, helping to attract potential buyers. By creating a more engaging experience, Metaverse development companies can help real estate agents differentiate themselves from their competitors and present their properties in a memorable way.

Improved collaboration is another benefit of the Metaverse. Virtual meeting spaces can be created where real estate professionals, owners, and potential buyers can discuss properties in real-time, exchange documents, and make decisions more effectively.

Metaverse development companies can also help real estate agents analyze data more efficiently. By tracking user behavior within the Metaverse, agents can determine which properties are attracting attention, which features are most popular, and which areas are generating the most interest.

Finally, the Metaverse can help reduce the costs associated with traditional property listings. Instead of relying on physical staging or photography, real estate agents can use virtual staging and 3D models to present properties in an efficient and cost-effective way.

The Metaverse is transforming the way the real estate industry operates. As technology continues to advance, we can expect to see even more innovative uses of the Metaverse in the real estate industry.

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🔥 Deal of the Day! 🔥

Address: 500 Devils Wood Yard Rd, Heathsville, VA 22473

With its prime location on the Chesapeake Bay, this fully furnished 3-bedroom house at 500 Devils Wood Yard Rd, Heathsville, VA, offers a sandy beach, a spacious backyard for outdoor activities, and a sunroom with panoramic views, making it an ideal vacation rental for those seeking a blend of relaxation and recreation.

Airdna data:

Estimated monthly payment: $3,800/month

Estimated monthly revenue: $5,600/month

Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.

Stay tuned for tomorrow's edition of Keys, where we'll continue to unlock the latest and greatest in vacation rental investing. Don't forget to share Keys with your fellow investors! 🔑