High mortgage rates may have put a damper on growth in the short-term rental market in recent years, but in a twist of fate, they appear to be boosting bookings and profits for longtime hosts.
Mortgage rates above 6% have drastically slowed new investment in short-term rental (STR) properties, limiting competition for tenured hosts who have lower rates locked in, according to the new 2026 Midyear Outlook report from AirDNA, the leading provider of STR data and analytics.
For Airbnb hosts, it means 2026 is “a better year to own than to buy,” the report states.
“At the beginning of the year, we expected lower borrowing costs to bring more new supply to market,” says Bram Gallagher, director of economics and forecasting at AirDNA. “Instead, renewed inflation driven by the war in Iran and the resulting energy shock pushed mortgage rates back above 6%, delaying investment.”
Gallagher says that slower rate of STR supply growth, combined with healthy travel demand, has helped keep occupancy steady and given established hosts stronger pricing power.
“As inflation eases, we expect demand and investment activity to strengthen further in 2027,” he predicts.
Although mortgage rates momentarily dropped below 6% in February before the U.S. war with Iran began, they have since climbed sharply higher.
The average 30-year fixed mortgage rate was 6.49% on Thursday, according to Freddie Mac. The Realtor.com® economic research team expects mortgage rates to average around 6.3% across the year.
Elevated mortgage rates have kept new STR listings low by crimping profit margins for new investors.
Most new listings have come in lower-cost markets, including small cities, rural areas, and midsized metros, where purchasing a home for STR might still pencil, even with higher mortgage rates.
The 2026 FIFA World Cup has also influenced the STR market this year, with host cities such as Miami and San Francisco reporting a sturdy demand. While cities such as New York and Los Angeles are seeing stagnant growth, most host cities are still profiting from a higher pricing power.
AirDNA projects that supply will recover in 2027 as rates begin to ease, increasing competition in traditional vacation hot spots.
Average daily rates expected to grow in 2026
The lack of new supply in 2026 comes as a massive relief to existing owners who secured property prior to the reality of high rates, as they are temporarily protected by the lack of competition.
Halfway through 2026, AirDNA predicts that average daily rates (ADR) for vacation rentals will rise 2.8% this year compared with 2025. That’s up from the 1.8% annual growth seen last year.
However, it remains well below the 12.2% annual growth in ADR seen in 2021, when the COVID-19 pandemic fueled a massive surge in demand for short-term rentals.
Soaring pandemic profits led to a surge of investment in rental units, and the supply glut led to a bust as ADR turned negative in 2023. Since then, the market has been in rebalancing mode, heavily favoring existing owners with lower rates locked in.
Supply and demand both rising slowly
In its midyear update, AirDNA lowered its growth projections for both supply of and demand for STR in 2026.
The firm now projects total available listings to grow by 2.7% annually in 2026, matching the 2.7% annual increase in demand.
With supply and demand remaining roughly in balance, the economist Gallagher expects occupancy “to remain above the pre-COVID average of 57% for the foreseeable future.”
AirDNA projects a total occupancy rate of 57.4% this year, up slightly from 57.3% in 2025.
Annual growth in revenue per available rental (RevPAR) has climbed from around 0.7% in January to 3% in both April and May across the U.S. AirDNA expects full-year annual growth in RevPAR to average 2.9% in 2026.
Existing hosts gain pricing power
Both ADR and AirDNA’s Repeat Rent Index (RRI), which monitors pricing changes for the same listings over time, have been steadily increasing. AirDNA reports that the price increase has been a response to inflation.
Currently, RRI is growing faster than ADR, indicating that existing hosts have been able to better pass inflation costs on to consumers, versus the newer hosts who lack reviews and returning guests.
For existing hosts, the pricing power this trend indicates is tantamount to sitting on a goldmine.
While this current atmosphere will likely continue for the remainder of the year, AirDNA predicts that a “healthier” 2027 is on the horizon as inflation begins to ease and the energy shock gradually dissipates, leaving room for more prospective hosts to enter the field.
