# Best Short-Term Rental Markets in 2026: What the Data Actually Shows > Not all STR markets are created equal in 2026. Here's how to evaluate markets using real data — occupancy trends, regulatory risk, supply growth, and return benchmarks — rather than hype. Canonical: https://www.underwriteapp.com/blog/best-short-term-rental-markets-2026 Every year, a new list of "best Airbnb markets" makes the rounds. Most of them are wrong — not because the data is fabricated, but because they measure the wrong things. High occupancy doesn't mean high returns. High ADR doesn't mean strong cash flow. And a market that produced 20% CoC in 2022 may produce 8% in 2026 because supply has caught up to demand. This guide explains how to evaluate STR markets using the right metrics, what signals actually predict strong 2026 returns, and which market types are outperforming this year — without telling you to rush into markets everyone else has already found. --- ## The Problem With "Best Markets" Lists Most published STR market rankings optimize for one of three metrics: 1. **Highest ADR** — average nightly rate 2. **Highest occupancy** — percentage of nights booked 3. **Highest gross revenue** — RevPAR or annual revenue per listing The problem: none of these tells you what an investor actually needs to know. **High ADR** without knowing home prices tells you nothing about yield. An Airbnb in Aspen with a $600 ADR might generate a 5% gross yield on a $3M property. An Airbnb in Gatlinburg with a $200 ADR might generate a 22% gross yield on a $350,000 cabin. **High occupancy** doesn't account for operating costs or competition. A market with 78% occupancy but an HOA that's actively banning STRs is not a market you want to be in. **High gross revenue** ignores what you paid for the property and what it costs to run. **The right metric is cash-on-cash return** — actual cash received divided by actual cash invested. And to calculate that, you need all the inputs: revenue, expenses, purchase price, and financing. --- ## The Four Filters That Actually Matter ### 1. Supply Growth vs. Demand Growth Every STR market has two curves: supply (number of active listings) and demand (total nights booked). When supply grows faster than demand, occupancy falls and ADR compresses. When demand grows faster than supply, the opposite happens. Markets worth investing in show **stable or growing demand with limited supply growth.** This often means: - Geographic constraints on development (island markets, ski towns, cities with restrictive zoning) - Regulatory barriers that cap new STR supply (permit caps, owner-occupancy requirements) - Strong demand drivers that are growing (new flight routes to a market, new resort development, growing remote work migration) Red flags: - Markets where Airbnb listings grew >25% in the last 12 months without proportional demand growth - Markets with unrestricted STR permitting and low barriers to entry (any investor can add supply) - Markets where occupancy has declined YoY despite flat supply — demand is softening ### 2. Regulatory Risk STR regulation is the most underappreciated risk in this asset class. A city that bans STRs doesn't just reduce your revenue — it eliminates your business model entirely. **High-risk regulatory environments in 2026:** - Major urban cores: New York, San Francisco, Los Angeles, Boston, Chicago. Most have either banned STRs outright or severely restricted them to owner-occupied units. - Rapidly growing tourist markets under political pressure: Sedona (AZ), parts of coastal Florida, certain mountain towns in Colorado seeing resident backlash **Lower-risk regulatory environments:** - Rural and unincorporated markets: county-level regulation is often lighter than municipal - States with preemption laws that limit local STR restrictions (some southeastern and mountain west states) - Markets where the local economy is tourism-dependent and STRs are politically supported **What to do:** Before buying any STR, verify the current regulatory status with the local permitting office. Check whether STR permits are capped or on a waitlist. Research pending legislation. This is 30 minutes of due diligence that can save you from a catastrophic outcome. ### 3. Gross Yield Gross yield is the simplest sanity check: **annual gross revenue ÷ purchase price.** A property purchased for $400,000 that earns $80,000/year in gross STR revenue has a 20% gross yield. **Benchmark ranges:** - < 10% gross yield: generally too low for STR to pencil after expenses and debt - 10–15% gross yield: possible but tight; depends heavily on expense structure and financing - 15–20% gross yield: solid; likely to produce positive cash flow with reasonable financing - > 20% gross yield: strong; these deals typically show excellent CoC and DSCR In 2026, gross yields above 18% are increasingly concentrated in secondary and tertiary markets — smaller ski towns, Smoky Mountain gateway communities, rural lake districts, emerging coastal markets in less-saturated states — rather than in primary vacation destinations where prices have fully adjusted. ### 4. Downside Scenario (What If STR Fails?) The best STR investments have a plausible fallback. If you can't operate as an STR, can the property: - Be rented long-term at a rent that covers debt service? - Be sold to a primary residence buyer in a liquid market? - Be used as a vacation property personally while you wait out a regulatory environment? Markets where STR income is so far above LTR income that there's no viable LTR fallback create concentration risk. The property is entirely dependent on the STR operating environment. --- ## Market Types Performing Well in 2026 Rather than a specific list (which would be outdated before you finish reading), here are the market profiles that are outperforming in 2026 data: **High-yield mountain cabin markets (Southeast)** The Smoky Mountains (Sevierville, Pigeon Forge, Gatlinburg TN; Blue Ridge GA) continue to show strong demand with moderate supply growth. Median property prices remain accessible ($300,000–$500,000 for a viable STR cabin), and gross yields of 18–25% are achievable. Regulatory environment is favorable. **Emerging coastal markets (Gulf and Southeast Atlantic)** Markets like Gulf Shores/Orange Beach (AL), Crystal Coast (NC), and portions of the Florida Panhandle outside the most saturated areas (30A, PCB) show stronger yields than established Florida coastal markets where prices have risen faster than revenue. **Drive-to lake and rural markets** Lake cabin markets within 2–4 hours of major metros — Lake of the Ozarks (MO), various Texas Hill Country lake properties, lakes in Tennessee and North Carolina — show strong occupancy driven by weekend demand from large urban populations, with property prices that haven't fully priced in STR income potential. **Ski-adjacent (not ski-in/ski-out)** Properties 5–15 minutes from ski resorts often provide 60–80% of the revenue at 40–60% of the price. In markets like Park City (UT), Breckenridge (CO), or Tahoe (CA/NV), the price differential between slope-side and nearby communities creates compelling yield opportunities. --- ## How to Evaluate a Specific Market and Property The right workflow: 1. **Identify market category** using the four filters above (supply growth, regulatory risk, gross yield potential, downside) 2. **Pull market-level data** from AirDNA or Rabbu: occupancy trend, ADR trend, RevPAR trend, active listing growth 3. **Find comparable listings** for your specific property type in that market 4. **Build the full underwriting model** — gross revenue, expenses, NOI, DSCR, CoC — for the specific property at the specific price Step 4 is where most investors stop doing it manually and start looking for tools. Underwrite does steps 3 and 4 automatically: pull comparable revenue data, model the expenses, calculate the returns. You enter the property address or paste a Zillow link; the platform runs the full analysis in about 15 minutes and outputs a deal report with sensitivity scenarios. **[Run a market and property analysis free.](/signup)** No credit card required.