Best Short-Term Rental Markets in 2026

How We Evaluate STR Markets

Not all vacation rental markets are created equal. Our market rankings are based on five factors:

1. ADR (Average Daily Rate): The nightly rate comparable properties command. Higher ADR markets generate more revenue per booked night — a critical driver of NOI given the high fixed cost structure of STRs.

2. Occupancy rate: The percentage of available nights that are booked across the market. Multiply ADR × occupancy and you get RevPAR — the single most important metric for comparing markets.

3. Regulatory stability: Markets where STR regulations are clear, permitting is available, and the regulatory environment is stable or improving. Regulatory risk is the existential risk in STR investing.

4. Supply growth: Year-over-year growth in active listings. Markets with rapid supply growth face increasing competition and downward pressure on occupancy and ADR.

5. Home values relative to revenue: The cap rate potential. A market with $65,000 average annual STR revenue and $650,000 median home values offers a 10% gross yield — significantly better than a market at $45,000 revenue and $900,000 home values.

Tier 1 — Strongest STR Markets in 2026

These markets combine high ADR, strong occupancy, favorable regulatory environments, and home value-to-revenue ratios that support positive cash flow. They represent the highest-confidence STR investment environments in the US market.

Tier 2 — Solid Markets With Strong Fundamentals

These markets offer reliable STR performance with somewhat lower revenue potential than Tier 1, but often with lower entry prices that produce comparable or better cap rates.

Tier 3 — Emerging Markets Worth Watching

These markets show strong emerging fundamentals: supply is still growing fast, home values haven't fully caught up to STR revenue potential, and regulatory environments remain favorable. Higher risk, higher upside.

Markets to Approach With Caution

These markets have attractive revenue numbers but carry meaningful regulatory or structural risks that make them higher-risk for new investors in 2026.

New York City: Among the strictest STR regulations in the US. Local Law 18 (effective 2023) requires hosts to register, be present during guest stays, and limits bookings to 2 guests — effectively eliminating the full-unit STR model that drives investor economics. Enforcement is active and penalties are significant.

Austin, TX: Strong demand metrics ($213 ADR, 62% occupancy, $48,200 average revenue) but the city has proposed and implemented various STR license caps and neighborhood-specific restrictions. High listing growth (13% YoY) is compressing occupancy. Due diligence on permit availability is critical before any Austin STR acquisition.

New Orleans, LA: The city has implemented cap licenses, residency requirements, and neighborhood-specific STR caps. Available STR licenses are limited and may not be obtainable in many desirable neighborhoods. The potential is real, but verify licensability before purchase — not after.

The Market Selection Framework

For any market you're evaluating, answer these five questions before moving forward:

1. What does the permit situation look like? Is STR permitted in this specific jurisdiction? Are new permits available? What are the requirements (owner-occupied, night caps, occupancy limits)?

2. What is the gross yield potential? Divide average annual STR revenue by median home value. Target 10%+ gross yield for strong return potential. Below 7%, the numbers are difficult to make work with financing.

3. What is the break-even occupancy? At local ADR and acquisition cost, what occupancy do you need to cover all costs? Compare to market average occupancy — you want at least a 10 percentage point buffer.

4. What is the supply trajectory? Growing supply markets face increasing competition. New listings growth above 15–20% YoY is a yellow flag. Zero to modest growth in established markets suggests sustainable supply/demand balance.

5. Why would someone vacation there? The fundamental question. Markets with a clear, compelling visitor use case (beach, ski, national park, major city events) outperform generic suburban markets consistently.

2026-Specific Factors

FIFA World Cup 2026: The US, Canada, and Mexico are co-hosting. US host cities include New York, Los Angeles, Dallas, San Francisco, Seattle, Kansas City, Philadelphia, Miami, Boston, and Atlanta. These cities will see significant demand spikes during the tournament period (June–July 2026). Short-term plays in host city markets may offer outsized returns during this window.

Remote work normalization: Longer average stays (5–14 nights vs 2–4 nights in 2019) continue to drive demand in mountain, beach, and rural markets. Properties optimized for remote workers (fast WiFi, dedicated workspace, longer minimum stays) are outperforming in these segments.

Supply growth concern: Overall STR listing inventory has grown significantly since 2020. In many markets, supply growth has outpaced demand recovery. Markets showing 15%+ YoY listing growth should be underwritten conservatively — assume occupancy 5–8 percentage points below current market average.

Insurance market hardening: STR insurance premiums have risen significantly in high-risk areas (hurricane zones, wildfire-risk markets). Factor current and likely future insurance costs carefully into your underwriting — what was $1,800/year in 2022 may now be $3,500–5,000 in affected markets.

How to Use Market Data in Your Calculator

Our city market pages pre-populate the STR ROI Calculator with actual ADR, occupancy rate, and revenue benchmarks for each market. Here's how to use this effectively:

Step 1: Go to your target city's market page (e.g., /markets/scottsdale-az). Review the market metrics — ADR, occupancy, average annual revenue, RevPAR.

Step 2: Click "Analyze in Calculator" to pre-populate the STR ROI Calculator with market benchmarks. These give you a realistic starting point based on actual comparable performance.

Step 3: Adjust the ADR down 10–15% for a new listing with no reviews, which typically performs below market average. Once you achieve Superhost status (3–6 months with good management), you can expect to reach or exceed market average.

Step 4: Enter your actual purchase price, down payment, and interest rate. The market data provides revenue benchmarks — your financing terms determine the final return profile.

Frequently Asked Questions