As we move through the second half of 2025, the U.S. housing market continues to navigate a complex landscape. Fortunately, our short-term rental market update 2025 will breakdown everything you need to know about this market and more.
For short-term rental (STR) operators and potential Airbnb investors, recent trends present a mix of challenges and emerging opportunities. With high borrowing costs, evolving consumer demand, and shifting inventory levels, the mid-year outlook requires careful analysis for those planning to invest in or expand their STR operations.
State of the Market in Mid-2025
The housing market’s performance in the first half of 2025 reflects continued adjustments after several years of economic turbulence. According to the latest data from the National Association of Realtors (NAR), existing-home sales fell by 3.8% in June 2025 compared to a year earlier. While this decline is less severe than last year’s, it underscores how affordability challenges remain a key factor suppressing sales volume.
Despite slower sales, the median existing-home price rose 2.5% year-over-year, reaching $419,700 nationally. This modest price increase suggests that while demand has softened in some regions, tight supply and steady interest from certain buyer demographics are supporting price resilience.
NAR Chief Economist Lawrence Yun recently noted that the market may see a “slow thaw” in activity as mortgage rates stabilize and more inventory reaches the market later in 2025. Increased inventory could ease upward pressure on prices, creating better opportunities for investors who have been sidelined by competition and cost concerns in recent years.
Mortgage Rates and Affordability
Mortgage rates remain one of the most significant influences on housing market dynamics. As of late June 2025, the average rate for a 30-year fixed mortgage stands at 6.45%, down slightly from its peak of 6.95% earlier this year. While rates remain historically high compared to pre-pandemic levels, the modest decline has sparked cautious optimism among buyers and investors.
Affordability, however, continues to be a pain point. Many prospective buyers are still priced out, particularly in major metro areas. This affordability crunch has also contributed to a “lock-in effect,” with existing homeowners reluctant to sell and give up lower-rate mortgages.
For STR operators, this environment has a dual effect: while acquiring new properties may involve higher borrowing costs, rental demand remains strong, especially in suburban and secondary markets where travelers are seeking more affordable alternatives to urban centers.
Regional Trends
The housing market’s performance varies considerably by region, highlighting the importance of local market knowledge for Airbnb investors.
South: Home sales declined 2.9% year-over-year in June, but the region continues to lead in new construction and inventory gains. States like Texas and Florida are seeing increased STR interest due to their tourism appeal and more favorable regulatory climates.
Midwest: This region remains relatively stable, with flat sales growth and steady price appreciation around 1.8%. Affordability relative to coastal regions makes the Midwest attractive for first-time STR investors.
Northeast: Sales slipped 4.1% as high prices and limited inventory continue to weigh on this market. However, niche STR opportunities still exist in tourist destinations like upstate New York and coastal New England.
West: While sales volume remains down 5% year-over-year, home prices have started to moderate, offering some relief for investors in historically high-cost markets like California and Colorado.
These trends emphasize the need to assess individual markets carefully, as national averages can mask significant local variation.
Inventory and New Construction
Housing inventory has improved modestly in 2025. Realtor.com reports that active listings nationwide increased 15.7% compared to the previous year, the first double-digit gain since 2020. This growth is uneven, though:
- The South continues to lead with a 26% rise in active listings, thanks to robust construction activity.
- The West saw a 19% increase in inventory, while the Midwest and Northeast trailed at 12% and 8%, respectively.
New construction has helped ease inventory pressures in select markets. Builders have increasingly focused on smaller, more affordable single-family homes that align with STR investment strategies targeting middle-income travelers.
For Airbnb operators, increased inventory in key tourist areas may translate to more competitive pricing opportunities when acquiring properties, especially in regions seeing a rise in motivated sellers.
Investment Opportunities
The mid-2025 housing market offers both headwinds and tailwinds for STR investors. Elevated mortgage rates have made financing new properties more expensive, but rental demand remains resilient, fueled by continued interest in domestic travel and alternative accommodations.
Markets showing the strongest performance for Airbnb properties tend to have:
- Strong local economies and population growth.
- Favorable STR regulations (or at least no significant new restrictions).
- Year-round tourism appeal.
Examples include parts of Florida, Texas Hill Country, and certain ski resort towns in the West.
Savvy investors are also exploring creative financing options—such as partnerships or seller financing—to navigate higher interest rates while positioning themselves for long-term gains.
Legislative Considerations
One wildcard for STR operators is the regulatory landscape. Several cities and states are debating stricter rules on short-term rentals, which could impact profitability. Before investing, it’s crucial to research not just current laws but also any proposed legislation that could affect STR viability.
One big piece of legislation that could affect the market this year is the so-called “One Big Beautiful Bill” that was signed into law midway through the year. I put together a deep-dive blog post that includes in-depth analysis of the OBBB and its new provision if you’d like additional info.
Conclusion
The mid-year housing market of 2025 presents a challenging but not insurmountable environment for Airbnb hosts and investors. While higher mortgage rates and affordability issues continue to cool demand in some regions, opportunities remain in markets with strong fundamentals, rising inventory, and robust rental demand.
STR operators who stay informed, conduct thorough local market research, and structure their investments wisely will be best positioned to succeed in this evolving landscape.
At Shared Economy Tax, we specialize in helping Airbnb hosts and real estate investors maximize their tax savings while navigating complex market conditions. Get started now with a 1-on-1 strategy session to explore how our experts can help you grow your STR business.
