John Kenney is the real estate agent who has taken over the sale of this two-bedroom rural cabin in Gatlinburg, Gatlinburg, Tennessee, with a Matterhorn Drive. This vacation home is located at the foot of the Great Smoky Mountains and is about a 30-minute drive from Hollywood, Dollywood. The area attracts millions of tourists every year. During a peak period in the real estate market, it could have sparked a bidding war; however, it has been on the market for two years now.
Since its first listing in January 2024 with a asking price of $850,000, this house has undergone continuous price reductions and repeated re-listings. Today, the owner's asking price has dropped to below $600,000, a decrease of nearly 30% from the initial price. The listing information reads: “NEW PRICE, BIG MOUNTAIN ENERGY!”
Kenney said to me, "We are now chasing the market."
Vacation homes like these used to be highly sought after by savvy Airbnb investors or retirees with disposable income looking for a weekend getaway spot. In 2021, low interest rates and a surge in vacation bookings fueled a buying boom, turning otherwise tranquil markets such as Gatlinburg and Big Bear Lake, California ( Big Bear Lake ), into astonishing examples of housing frenzies. However, this boom did not last long. The short-term rental business has now entered a plateau, and investors have to be more cautious as they can no longer enjoy record-low borrowing costs and fully booked calendars. Other owners of second homes have also realized that properties they only use a few times a year may not be worth the associated costs and hassle. All these factors combined have led to a surge in listings for sale and price reductions in six figures. A report released this summer by the research firm Parcl Labs stated that vacation home sellers in the United States are "the most eager to sell in the housing market."
However, for those saying goodbye to summer vacation homes and ski chalets, the situation is not entirely gloomy. In these markets, most property prices are still significantly higher than they were in 2019, and owners who have held onto their properties for several years are likely to make a considerable profit. But the turnover rate of vacation home owners is generally faster than that of the general population. Local agents say that owners typically hold onto their properties for four to six years before wanting to change their environment, which means that some sellers who bought at high points are now facing substantial losses. Even those who do make a profit may feel disappointed when they finally sell, as the returns they receive are lower than they expected. For example, the owner of 317 Matterhorn bought it in mid-2020 for $380,000, which would be considered a bargain by today's standards. Kenney told me that this “retirement savings” investment is still expected to yield good returns, but owners are still affected by the explosive valuations seen in 2021 and 2022.
Kenney said, "They originally thought they could add a bit to their pension with this, but now they don't have as much as they thought."
At the beginning of this century, it was not difficult for resort property owners to sell their properties, as there was a trend of people moving out of large cities at that time. Zillow's analysis of federal mortgage data shows that in 2020, applications for vacation home mortgages increased by 30% compared to the previous year; Redfin's analysis indicates that by March 2021, the demand for second homes had risen by 88% above pre-pandemic levels. These figures do not take into account further market distortions caused by cash-only purchases. It is not surprising that popular areas were targeted—second-home buyers flocked to the coastal towns and mountain regions that are often on people's vacation lists—but the sharp rise in housing prices came as a shock to both local residents and out-of-town competitors. Zillow data shows that housing prices in Fort Gatlin more than doubled within two years. Big Bear Lake saw a 77% increase, while metropolitan areas, including Destin, Florida ( Destin ), experienced a rise of nearly 50%.
As Americans stuck at home began to grow tired of their accommodations during the pandemic, the short-term rental business flourished rapidly. According to data from research institution AirDNA, over three consecutive years starting in 2021, reservation volumes on platforms such as Airbnb and Vrbo saw double-digit growth. Renters took this opportunity to raise the nightly rent rates while maintaining a high occupancy rate. Inspired by the surge in demand, a new wave of landlords also opened their doors to tourists. The average number of short-term rental properties soared to nearly 1.5 million in 2023, an increase of nearly 38% compared to two years ago and about 25% higher than the level in 2019.
Today, the short-term rental industry is far from experiencing a "crash" – occupancy rates remain stable in most areas of the United States, and daily rents have also seen a slight increase year-over-year. However, the forces that drove the frenzy during the pandemic have now turned around to harm vacation home owners and rental investors. In some regions, there are simply too many properties Airbnb, giving tourists the bargaining power to force owners to lower prices, and making it more difficult for people to justify the substantial investments they made in the first place in order to expand their portfolios. Another agent who frequently serves short-term rental buyers in Gatlinburg Katelyn Warren said that she usually advises following the "10% rule": the annual booking income should be equivalent to 10% of the purchase price of the property. For example, for a house that costs $500,000, the buyer would expect an annual pre-tax income of $50,000. Warren told me that in 2021, this threshold was easily achievable, but nowadays, most investors in her area are only seeing returns of 7% or 8%. The typical reaction is: "Oh, that’s not feasible for me."
People who spent a fortune on buying vacation homes five or six years ago are now starting to more seriously weigh the pros and cons of such "second homes." With children growing up and schedules becoming busier, the time available to go on vacations away from the city has decreased. The monthly payments for mortgages, insurance, and taxes are also no longer so easily manageable. Moreover, the maintenance costs continue to accumulate. Gary Doss is a seasoned agent in Big Bear Lake, a popular vacation destination in Southern California known for its beautiful lake views and convenient skiing facilities. He says that many of the sellers he has worked with this year are those who purchased homes in 2021 and 2022. Now, when these homes are put back on the market, the returns are no longer as attractive, and mortgage interest rates have exceeded 7% for the first time in over a year.
Doss said, "We could be said to have encountered a perfect storm."
Zillow data shows that housing prices in Bear Lake have fallen by 20% compared to their peak in June 2022; Realtor.com findings indicate that the number of available homes in surrounding counties has increased by nearly 47% during the same period.
In June, Parcl Labs found that vacation homes were more likely to be sold at reduced prices than other properties – 37.3% of vacation homes on the market had price reductions, compared to 35.1% for other types of properties. The company also observed that Destin, the Florida Keys, the Smoky Mountains region, and Palm Springs ( Palm Springs ) were areas where the majority of vacation home owners decided to sell their properties. Approximately 3% to 5% of the inventory of vacation homes in these areas was available for sale. These figures only apply to owners of their second homes and do not include rental investors who hold multiple properties.
With price reductions being so common, buyers tend to wait for even deeper discounts. Doss told me, “As long as you see a large number of properties available, buyers usually become more cautious.”
The experiences of two adjacent properties in Bear Lake illustrate this point: 305 Starlight Circle is a spacious four-bedroom unit that was previously used for short-term rentals and was sold for $850,000 at the end of 2020. When it was put up for sale again in May 2025, the asking price was $1.2 million. However, it remained on the market until the end of the year, after which the owner decided to take it off the market, hoping to try again later. Later, Doss took over the marketing of this property, and they tried to list it again at the same price, but there was no interest until the price was lowered. Eventually, the house was sold for $1.1 million in May of this year. Compared to the neighboring property, this can be considered a successful case. The neighboring unit, 301 Starlight Circle, is also a four-bedroom property sold by Doss; it features log exterior walls and a view of an open valley. It was sold for $905,000 in 2020 but has been on the market since the end of June at a asking price of $1.3 million. Doss mentioned that houses in the $1 million to $1.5 million range are particularly difficult to sell. When he recently checked the local multiple listing system, there were about 50 properties available in this price range, but only a few had reached the contract stage.
Doss said, 'There are simply too many properties they are competing for.'
This situation is playing out in once-popular vacation destinations across the United States.
Kenney said, "I almost feel that buyers have developed a conditioned reflex; they only start looking at houses after seeing a price reduction first."
Homeowners of vacation homes may also choose to wait and see. In many cases, they have the ability to wait, especially in truly high-end vacation destinations like Jackson (Jackson, Wyoming) or Aspen, Colorado (Aspen), where price reductions are not common, and cash buyers do not have to worry about mortgage pressures. Less fortunate are those who bought at high points and cannot afford the costs of maintaining such once dream vacation homes. A client in Kenney bought two small cottages in 2022 and now realizes that they no longer use them. Kenney said, "It's not easy to deal with continuous maintenance and such for small cottages." Even if they could sell them all for $400,000, they would still face a loss of $150,000.
Perhaps intimidated by such "horror stories," potential rental property owners seem more hesitant about entering the real estate buying market. A recent study by AirDNA found that current short-term rental property owners have a significantly higher interest in purchasing more properties than those who have never been involved in the rental business. This is consistent with experiences from the past few years: if you have dealt with late-night guest complaints and adjusted nightly rent prices, you may be more aware of the associated risks. But if you are just standing outside the door watching, Jamie Lane, AirDNA the chief economist told me, "You would think, 'I don't know.' Interest rates are really high. Good deals are hard to come by. The risks simply seem greater."
Lane believes that this state is relatively healthy. The total number of short-term rental properties has reached a plateau, with only a 1.7% increase year-on-year in August. Investors have not flocked in, but this also means that existing property owners face less competition, and the occupancy rate has either remained stable or slightly increased.
Whether they are pure investors, seasonal travelers, or those who fall somewhere in between, participants in the vacation home market are both stubborn and capricious. Unlike primary residences, mountain vacation homes are not a necessity of life; and a seaside villa that remains vacant for most of the year can easily be sold off when finances are tight. Nowadays, calculating investors are more selective when making purchases and are reluctant to suffer losses by holding onto properties for the long term.
Doss joked with me, "To be honest, I don't even know how we manage to sell anything here at all. Because almost every seller I talk to says they don't need to sell, and almost every buyer says they don't need to buy."
However, transactions are still taking place, but the speed and prices may not satisfy anyone.
Doss said, "There's always a moment when they have to seriously discuss how exactly they need to proceed in order to sell the house."
