AirDNA: These are the 25 best places to invest in short-term rentals in 2024

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The pandemic created a perfect storm for the short-term rental market. Demand skyrocketed as stimulus-fueled professionals, who could work from anywhere, booked short-term rental stays amid the shutdown of international travel and cruises. With limited alternatives available, daily rates spiked. Add on top of that quantitative easing induced historically low mortgage rates, and you ignite an Airbnb buying frenzy that reached bonanza levels in markets like Phoenix and Austin.

But it was short-lived. As lockdowns lifted and travel options expanded with the return of cruises and international travel, coupled with an influx of new short-term rental properties bought during the frenzy, the market dynamics shifted. Many hosts have witnessed a decline in occupancy rates and a corresponding fall in daily rates.

Oversaturated short-term rental markets like Joshua Tree, a desert community that was a vacation hot spot during the pandemic, have plunged into short-term rental corrections (or as Amy Nixon calls “Airbnbusts”).

Look no further than 60815 Alta Loma Dr, Joshua Tree, CA 92252. The one-bedroom Mid Century Modern home was purchased for $600,000 amid the frenzy in September 2021. As mortgage rates spiked, Joshua Tree’s short-term rental driven boom turned to bust. In December 2023, the home was resold for just $340,000.

Amid this backdrop, where saturation and local law changes have pushed some short-term rental markets into correction mode, AirDNA rolled out its annual list of the "Best Places to Invest in Short-Term Rentals” in 2024. (ResiClub's sharing of this list shouldn’t be seen as an endorsement; please do your own research).

No surprise: This year’s list steers away from previous pandemic hotspots like Austin, Boise, and Phoenix. In fact, there’s not a single Texas, Arizona, or Idaho market on the list. That’s telling.

AirDNA acknowledged that last year's backdrop for the short-term rental market was "tough"; however, they're more optimistic about this year.

“2024 will likely be a breath of fresh air for short-term rental (STR) hosts and investors discouraged by the tough year 2023 turned out to be,” wrote AirDNA. “As we predicted, RevPAR (revenue per available room) died down in 2023 following the highs of 2021 and 2022. The year closed out with an average drop of 6.7%. According to AirDNA’s latest Outlook Report, though, declines should ease and RevPAR should grow slightly in 2024. This gives Airbnb hopefuls reason to consider entering (or re-entering) the best short-term rental markets.”

As a part of its research for the 2024 list, AirDNA looked at local regulation.

“We consider both current regulatory risk for STR investors and the potential for future regulations in our assessment of top short-term rental locations. Our perspective is focused on real estate investors, so we classify municipalities that limit STRs to either hosted stays (where the property owner is present during the guest’s stay) or primary residences as highly restrictive. We highlight markets with significant regulations in the market write-ups for that location,” wrote AirDNA.

Big picture: Despite Airbnb’s better-than-expected earnings on Tuesday, and growing optimism from groups like AirDNA, there is certainly still turbulence in the short-term rental market, especially for hosts in saturated pockets of the country. The biggest unknown is whether the Fed can pull off a soft landing or if the fastest rate-hiking cycle in four decades leads us into a recession. If the latter occurs, ResiClub’s baseline view is that at least some short-term rental markets could be in for more pain. The other significant wild card, of course, is what happens on the local regulation front.