AirDNA recently released a report on the short-term rental industry, highlighting slower nationwide listing growth (6.8% vs. 14.4% in 2023) and continued affordability challenges due to high mortgage rates and rising home values. However, smaller cities and rural areas remain hotspots, experiencing a 16% increase in listings, signaling strong investment potential. Despite economic headwinds, STR investors can find viable opportunities by focusing on high-demand markets, where occupancy and average daily rates (ADR) are projected to rise, improving cash flow potential.

Source: AirDNA (February 2025)

Other key highlights include:

• Peoria, Illinois: Ranked as the top market for STR investment, Peoria offers affordable property prices and a growing demand for short-term rentals, making it an attractive option for investors seeking strong returns. 
• Fairbanks, Alaska: Holding the second spot, Fairbanks benefits from unique tourist attractions and limited competition in the STR market, providing opportunities for high occupancy rates and premium pricing. 
• Akron, Ohio: As the third-ranked city, Akron’s revitalization efforts and affordable housing market contribute to its potential for profitable STR investments.
• Listings in small cities and rural areas surged by 16%, while mid-sized cities grew by 10.3%, reinforcing their viability for STR investments.
• Despite financial hurdles, occupancy rates, and ADRs are expected to improve in 2025, potentially offsetting acquisition costs.

Christine Mao of Skift comments on this report: “Rising real incomes and stronger consumer confidence will drive increased traveler demand, and that the market will continue to build on the stabilization gained in 2024. Occupancy rates are expected to make steady gains toward pre-pandemic levels of 56% by the end of the year. ADR and RevPAR are also forecasted to increase, bringing a stronger revenue outlook for investors — especially as high mortgage rates and rising home values continue to push up property acquisition costs.”

Paul Stevens of STRz comments on another industry report that shows direct bookings are becoming a critical strategy for vacation rental hosts and property managers, now accounting for 34% of all bookings—second only to Airbnb. While 57% of hosts cited “driving direct bookings” as their biggest challenge in 2024, nearly two-thirds prioritize it for 2025 to reduce reliance on third-party platforms, avoid fees, and improve guest experiences. Tech adoption continues to reshape the industry, with self-check-in, smart locks, and AI-powered management tools gaining traction.

Heather Schlitz of Reuters reports that farmers increasingly use platforms like Airbnb for additional income opportunities. Agritourism has emerged as a crucial revenue stream for farmers facing declining crop prices and rising costs, with short-term rentals on farms booming as urban travelers seek rural getaways. Listings for farm stays on platforms like Airbnb and HipCamp have surged 77% in the past five years.

Rashaad Jorden of Skift notes that Expedia and Hilton recently reported strong earnings. Expedia is exploring AI partnerships and M&A opportunities, while Hilton anticipates a corporate travel rebound post-election. Meanwhile, Booking Holdings CEO Glenn Fogel doubts consumers will pay extra for sustainable travel, emphasizing the need for government action to drive greener choices.

Housing sentiment

The Fannie Mae Home Purchase Sentiment Index (HPSI) rose slightly in January to 73.4, driven by increased optimism about home prices despite worsening mortgage rate expectations. While 78% still see it as a bad time to buy, 43% now expect home prices to rise, up from 38% in December. Mortgage rate optimism dropped sharply, with only 35% expecting lower rates, down 13%. Rent price expectations also surged, with 65% predicting increases.

Joel Berner of Realtor.com comments on the index, noting that despite a slight uptick, economic uncertainty lingers, with 69% of respondents believing the economy is on the wrong track. While optimism around home prices grew, expectations for mortgage rate declines fell sharply, reflecting concerns over persistent 7% rates. Renters on the cusp of homeownership showed renewed confidence, with 68% now favoring buying over renting.

Ashok Chaluvadi of the National Association of Home Builders (NAHB) reports that high interest rates remained builders’ top challenge in 2024, with 91% citing it as a significant issue, though slightly fewer (78%) expect it to persist in 2025. Inflation concerns have eased, but material costs, lot availability, and labor shortages remain pressing. While fewer builders worry about economic uncertainty and political gridlock, more anticipate rising material costs and ongoing regulatory fees to challenge the market in 2025.

Source: NAHB (February 2025)

Diana Olick of CNBC reports that homebuyer mortgage demand continues to weaken, dropping 4% last week and remaining flat year-over-year, signaling a sluggish start to the spring market. Despite a slight dip in mortgage rates to 6.97%, home sales are near a 30-year low, with prices still at record highs. While more homes are hitting the market, they’re lingering longer, pushing sellers to offer more price cuts, though competition remains strong enough to prevent steep declines.

Jobs data

Jing Fu of NAHB reported on the jobs data released last week, highlighting that job growth slowed in January, adding 143,000 jobs, the lowest in three months, as severe weather impacted hiring. The unemployment rate edged down to 4.0%, while wage growth remained steady at 4.1% year-over-year, outpacing inflation. Despite a downward revision of 2024 job growth estimates, labor force participation improved, particularly among prime-age workers, signaling a still-resilient job market.

Danielle Hale of Realtor.com comments on the data, reporting that “payroll data show smaller average job gains for 2024 of 166,000, but job growth is still robust enough to keep the unemployment rate low and wages on an upward trajectory. There was mixed performance across industries, with sectors such as health care, retail trade, and social assistance adding jobs while payrolls declined in mining. Construction jobs were little changed while earnings of construction workers rose.”

Source: Realtor.com (February 2025)

Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA) comments on the data release:

“At first glance, on net, these data indicate a job market that remains reasonably strong. Job growth over the past three months has averaged a gain of 237,000, likely above what can be sustained this year. However, there are several factors working to cloud this picture. First, there were substantial revisions to prior payroll data, with job growth from the most recent months revised higher, but the annual benchmark process showing slower job growth for 2024.  Second, the household survey was adjusted in January to recognize the impact of substantial international immigration in recent years, adding 2.9 million people to the population count as of January, which is one factor pushing the unemployment rate down.”

Finally, Colby Smith of the New York Times highlights that with job growth slowing but remaining stable, the Fed is likely to hold interest rates steady in the near term, awaiting clearer signs of inflation easing. The unemployment rate remains low at 4.0%, and hiring revisions show resilience, reducing the urgency for rate cuts. However, concerns over tariffs, immigration policies, and economic uncertainty could shift sentiment, making future rate decisions more data-dependent.