What was once a pandemic-fueled boomtown for short-term rentals has flipped into the Houston region’s biggest buyer’s market.
The number of homes for sale in Galveston has jumped 42 percent year-over-year, according to the Houston Association of Realtors, driven in large part by a wave of short-term rental owners looking to exit, the Houston Chronicle reported.
There were about 1,000 homes on the market as of the first quarter, more than double the inventory from two years ago.
For sellers, the result is hard to swallow. The average Galveston listing is sitting for over five months, and some luxury homes — like a six-bedroom, nearly 6,000-square-foot residence in the city’s historic district listed for $1.1 million — have drawn little interest.
“Nobody’s really even looking,” seller Linda Stickline told the outlet.
Behind the slowdown is a perfect storm of rising costs, operational headaches and post-pandemic disillusionment.
In the pandemic era, low interest rates and remote work drove a rush of vacation rental buying. Many investors paid premium prices often without solid local guidance, hoping for strong returns. Now those projections are falling flat.
“Some [investors] were being represented by Realtors who weren’t really familiar with the island,” said Louis Salas of Re/Max Leading Edge. “They didn’t look at comps or the actual numbers. They were just excited.”
For some investors, the profit margins have simply vanished. Property taxes have ballooned, with home values up nearly 50 percent over five years in some ZIP codes. Galveston County has also begun taxing furniture inside rentals, treating it as business personal property.
Insurance costs, including windstorm, flood and homeowners coverage, have climbed more than 20 percent in recent years. Some landlords are paying nearly $10,000 a year in premiums alone.
Others underestimated the year-round work needed to run a competitive listing.
Jennifer Delaney, who now builds and designs tiny homes tailored to short-term guests, said her high-end rentals are still turning a profit. But many less-prepared operators didn’t reinvest, update or stand out in an increasingly saturated market, she said.
Some investors are seeing opportunity in the glut.
“There’s so much out there; we didn’t have to take risks,” said Ruth Villatoro, who’s closing on a vacation property this spring.
— Judah Duke
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