The people that aren't selling are still paying upkeep and property taxes. Unless they live in it, they will tire of the financial bleeding eventually and start to understand the "sunk cost fallacy."
Correct. However, second homes are a bit different. They don't get used as often and the financial bleeding is viewed different. They're also in a market where AirBnB/VRBO is extremely lucrative. If you can tolerate a bit of pain from renting it out, there's really no finanicial bleeding.
Anecdotally, Airbnb rentals are a lot less profitable now. An informal and definitely biased survey of friends I know who run 1-4 units: price drops of about 40% are happening, and they have significantly fewer inquiries.
I predict that will continue as potential guests tighten their belts. And as more 2nd homes are a drag on their owners cash flow, there will be more people listing on ABNB to make some cash. That will cause a glut of supply and further drive down prices.
Airbnb was benefitted me many times as a resident when the renter protections in my city made renting difficult. Renting an airbnb allowed my landlord to bypass renter protections which made it very low friction to use airbnb whereas signig a lease was nigh impossible because landlords wanted all kinds of evidence I'd be a good renter as it was so hard to kick a renter out.
By using Airbnb, I was able to continue living and working in the city by ceding away my rental protections in exchange for not needing good credit and other assurances for the landlord. Win-win.