The 2026 STR Market Report: Where to Find Deals in a Low-Liquidity Environment

About the Author

This guide was written by Matthew Gigantelli, a cost segregation engineer and real estate tax strategist at Overline who has completed engineered studies on over 3,000 properties. Gigantelli holds a B.A. in Finance (summa cum laude) from Rasmussen University and a certification from Boon Tax Educators (2026).

Matthew Gigantelli on the current acquisition environment: "The investors making the best acquisitions right now are not the ones with the most capital. They are the ones who understand that a property sitting on the market for nine months at 6.4% rates is a fundamentally different negotiation than a property that sold in two weeks at 3%. The math has shifted. The investors who have shifted with it are building portfolios that will look brilliant in three years."

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The Transaction Volume Crisis

Here is a number that should reframe how you think about the current market: fewer homes sold in the 2023-2025 period than in any three-year stretch since 1995.

That includes 2008-2010. That includes the early-1990s recession. That includes every market dislocation in modern real estate history.

But the underlying cause is fundamentally different from 2008. In 2008, transaction volume collapsed because buyers could not get financing and sellers were underwater. In 2026, transaction volume is depressed because sellers refuse to sell. Roughly 80% of existing mortgages carry rates below 5%. Moving means surrendering a 3.2% rate for a 6.4% rate — an effective cost increase of $800-$1,200/month on a median-priced home. Sellers are locked in place.

This creates two simultaneous realities for STR investors:

1. Inventory is historically scarce. The total number of listings available at any given time is well below pre-pandemic norms in most markets.
2. The listings that do exist are disproportionately motivated. If someone is selling into a 6.4% rate environment, there is usually a reason — divorce, estate settlement, job relocation, overleveraged investment, or a failed STR that bled cash for 18 months.

The second point is where the opportunity lives. This is not a market for casual browsing. It is a market for surgical targeting of motivated inventory.

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Market-by-Market Snapshot

Not all STR markets are experiencing the same dynamics. Some are oversaturated with listings. Others are inventory-starved. Some have regulatory tailwinds. Others are tightening. Here is a snapshot of the major STR investment markets as of Q1 2026.

The Market Comparison Table

Market	Median Price (STR-Suitable)	Avg ADR	Occupancy	Inventory Trend	Regulation Status	Tax-Friendliness
Great Smoky Mountains, TN	$385,000	$245	62%	High — 100+ new listings/quarter	Stable, county-level permits	High — no state income tax
Destin / 30A, FL	$520,000	$310	58%	High — significant oversupply	Preemption intact, STR-friendly	High — no state income tax
Kissimmee / Orlando, FL	$410,000	$195	54%	High — institutional glut	Mixed — HOA restrictions increasing	High — no state income tax
Poconos, PA	$295,000	$215	55%	Moderate — seasonal demand	Stable, township-level	Moderate — PA flat 3.07% state tax
Gulf Shores / Orange Beach, AL	$445,000	$275	56%	Moderate	Stable, STR-friendly	High — low state tax burden
Scottsdale / Mesa, AZ	$485,000	$265	52%	Moderate — cooling from 2022 peak	Tightening — new permit caps in some areas	Moderate
Colorado Mountains (Breck, Vail corridor)	$625,000	$340	48%	Low — limited inventory	Restrictive — many towns capping permits	Moderate — 4.4% state flat tax
Austin / Hill Country, TX	$395,000	$220	50%	Moderate — oversupply in Austin proper	Tightening — Austin STR restrictions active	High — no state income tax
Northeast Metros (Hudson Valley, Catskills)	$375,000	$285	61%	Low — high competition for listings	Varies by municipality	Low — NY/NJ high state tax
Joshua Tree / Desert Markets, CA	$445,000	$235	45%	Moderate — saturation concerns	County-level, currently stable	Low — CA high state tax

Sources: AirDNA market data (Q4 2025), Zillow Home Value Index, Overline portfolio analysis. ADR and occupancy reflect trailing 12-month averages for professionally managed STR properties.

Florida: Oversupply Meets Insurance Crisis

Florida remains the largest STR market in the country by unit count, and it is showing the most stress. Florida rental property insurance premiums have increased 40-100% since 2022, according to industry data, with costs spiking 18% in 2025 alone — making Florida the most expensive state for property insurance. Annual premiums for STR properties commonly run $4,800-$8,000+ depending on location, coverage, and property value. Combined with elevated property taxes and HOA special assessments from aging condo infrastructure, operating margins on Florida STRs have compressed significantly.

The opportunity: Florida has the highest concentration of motivated sellers in the country. Properties that were purchased in 2021-2022 at peak prices with assumptions of 70%+ occupancy are now sitting at 54% occupancy with insurance bills that have doubled. These owners want out.

The Smokies: Volume and Value

The Great Smoky Mountains attract 14 million-plus visitors annually — more than Yellowstone, the Grand Canyon, and Yosemite combined. The market supports that traffic, but it is also absorbing 100+ new STR listings per quarter, which has pushed average occupancy from the mid-70s in 2021 down to the low 60s.

The value play here is in Sevier County and the broader Gatlinburg/Pigeon Forge corridor, where cabin inventory from 2021-2022 purchases is repricing. Tennessee's lack of state income tax makes the after-tax math significantly more favorable than comparable properties in states like California or New York. See our STR after-tax profit reality check for a detailed walkthrough of how state tax burden affects net returns.

The Poconos: Undervalued and Underleveraged

The Poconos remain one of the best value propositions in the eastern STR market. Median purchase prices for STR-suitable properties sit around $295,000 — roughly 40% below comparable Smokies properties — while ADRs and occupancy rates are competitive. Pennsylvania's flat 3.07% state income tax is a fraction of what operators pay in New York or New Jersey for properties that draw from the same metro demand pool (New York City, Philadelphia, northern New Jersey).

Colorado and Arizona: Regulatory Headwinds

Both Colorado mountain towns and parts of the Phoenix/Scottsdale metro area have moved toward permit caps and STR restrictions. In Colorado, towns like Breckenridge, Vail, and Telluride have capped new STR permits, creating a two-tier market: existing permitted properties carry a premium, while unpermitted properties trade at a discount. Arizona passed statewide preemption in 2016, but individual cities like Sedona and Scottsdale have found workarounds through nuisance ordinances and permit requirements.

Texas: Austin's Correction

Austin proper has become one of the more challenging STR markets due to a combination of oversupply (driven by the 2020-2022 population boom), tightening city regulations, and a broader cooling of the Austin real estate market. The Hill Country surrounding Austin — Fredericksburg, Wimberley, Dripping Springs — remains more favorable, with fewer regulatory barriers and strong weekend demand from the Austin and San Antonio metros.

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The 9-Month Rule: Identifying Motivated Sellers

In a normal market, average days on market for a residential property runs 30-60 days. In the current environment, any STR property that has been listed for 9 months or longer is signaling one of several things:

• The seller's price expectation is disconnected from what the market will pay at current rates
• The property has operational problems (deferred maintenance, HOA issues, regulatory risk) that informed buyers are avoiding
• The seller purchased at peak pricing and is anchored to a number that would let them break even
• The property failed as an STR and the listing has been converted from a rental to a sale

The 9-month threshold matters because it is the psychological inflection point where sellers begin accepting that their price is wrong. Studies on listing behavior show that price reductions accelerate after 180 days and become most aggressive between months 9 and 12.

For STR investors, this is the target list. Every major MLS platform allows filtering by days on market. A property sitting at 270+ days in a 6.4% rate environment is a property whose owner has been paying a mortgage, insurance, property taxes, and possibly HOA fees for 9 months with no resolution. The carrying cost pressure is real.

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Rental History vs. Appraisal Value: Navigating the Valuation Gap

One of the most challenging dynamics in the current STR market is the gap between what a property appraises for based on comparable sales and what it is actually worth as a cash-flowing rental.

Appraisals are backward-looking. They rely on comparable sales from the prior 6-12 months. In a market where transaction volume is historically low, the available comps are sparse and often stale. A property might appraise at $450,000 based on a comparable sale from 8 months ago, but its actual revenue performance supports a valuation of $380,000 using an income approach.

This gap matters because:

1. Lenders use appraisal value. Your loan-to-value ratio is based on the appraisal, not on your revenue model.
2. Sellers anchor to appraisal value. They see the appraisal as validation of their asking price.
3. STR investors should value based on income. The property is worth what it produces, not what a comparable property sold for in a different rate environment.

When you underwrite an STR, start with the income approach: gross rental revenue minus operating expenses minus debt service equals cash flow. Back into the purchase price that makes that cash flow work at current rates. If the appraisal says $450,000 but your income model says $380,000, your offer should be informed by the $380,000 number. For a detailed framework, see our STR property analysis guide.

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The Low-Ball Offer Strategy

"Low-ball" has negative connotations, but in a low-liquidity market, the data supports aggressive pricing. Here is what we are seeing:

Days on Market	Avg Discount from List Price (Accepted Offers)	Seller Motivation Level
0-90 days	2-5%	Low — testing the market
90-180 days	5-10%	Moderate — open to negotiation
180-270 days	10-18%	High — price reductions accelerating
270-365 days	15-25%	Very high — carrying costs mounting
365+ days	20-35%	Maximum — often willing to accept creative terms

On a $425,000 listed property that has been sitting for 10 months, a 20% discount gets you to $340,000. At current mortgage rates, that $85,000 reduction translates to roughly $550/month in lower debt service — which can be the difference between a property that cash flows and one that does not.

The key is to make the offer data-driven, not emotional. Present the seller with:

• Comparable rental income data from the area
• Current operating cost analysis (especially insurance, if Florida)
• A clear financing timeline showing you can close

Sellers sitting at 9+ months are not offended by low offers. They are relieved to have an offer at all.

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Conservative Underwriting as Competitive Advantage

In a market where overleveraged investors are exiting and undercapitalized newcomers are pausing, conservative underwriting is not a disadvantage — it is a competitive moat.

Here is what conservative underwriting looks like in 2026:

Underwriting Input	Aggressive Assumption	Conservative Assumption
Occupancy	70%+	52-56% (national average)
ADR growth	5-10% annually	0-2% annually
Insurance	Current rate	Current rate + 15% buffer
Maintenance reserve	5% of revenue	8-10% of revenue
Vacancy buffer	None	2 additional weeks beyond occupancy assumption
Rate assumption	Current rate	Current rate + 0.5% (refi pessimism)

If a property works under conservative assumptions, it works. If it only works under aggressive assumptions, it is a speculation, not an investment. Our STR underwriting guide walks through the full model.

The investors who built portfolios in 2010-2012 using conservative underwriting in a distressed market are the ones who are independently wealthy today. The current market is not 2010, but the principle is identical: buy when others are scared, underwrite for the worst case, and let time do the work.

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Regulation Landscape by Market: Good Regulation vs. Bad Regulation

Not all STR regulation is bad for investors. In fact, some regulation creates a moat.

Good Regulation (for existing operators)

• Permit caps (Breckenridge, CO; parts of Maui, HI): Limits new supply, increasing the value of existing permitted properties
• Licensing requirements (Sevier County, TN; most Florida counties): Creates a barrier to entry that eliminates casual operators
• Minimum stay requirements (some mountain markets): Reduces turnover costs and attracts higher-quality guests
• Safety and insurance mandates: Raises operating standards, which pushes out underfunded operators

Bad Regulation (for all operators)

• Outright bans (parts of New York City; some California coastal towns): Eliminates the STR use case entirely
• Retroactive permit revocation (rare but devastating when it happens)
• Primary residence requirements (investor-owned STRs prohibited; only owner-occupied properties qualify)
• Excessive taxation (occupancy taxes stacked on top of already-high state income taxes)

Before acquiring in any market, verify the current and proposed regulatory environment at the municipal level. State-level preemption (as in Florida and Texas) provides some protection, but municipalities are constantly testing the boundaries.

For a full breakdown of how STR classification affects your tax position, see our STR tax loophole requirements guide.

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Tax Strategy Integration: Market Selection for Maximum Depreciation

Market selection is not just about revenue and occupancy. It directly affects your tax outcome.

State Income Tax Impact

A property generating $25,000 in net taxable income (before depreciation) in California costs you approximately $3,250 in state income tax alone (13.3% top rate). The same property in Tennessee or Florida costs you $0 in state income tax. Over a 10-year hold, that is $32,500 in cumulative state tax savings — real money that compounds when reinvested.

Bonus Depreciation and Market Selection

With 100% bonus depreciation now permanently restored under the One Big Beautiful Bill, the year-one tax impact of a cost segregation study is maximized. But the magnitude of that impact depends on the property's depreciable basis and the investor's marginal tax rate.

Consider two scenarios:

Factor	Florida STR ($420K)	Colorado STR ($625K)
Purchase price	$420,000	$625,000
Depreciable basis (80%)	$336,000	$500,000
Accelerated allocation (24%)	$80,640	$120,000
Federal tax savings (37%)	$29,837	$44,400
State tax savings	$0 (FL)	$5,280 (CO, 4.4%)
Total year-1 tax benefit	$29,837	$49,680
Effective cost after tax benefit	$390,163	$575,320

The Colorado property produces a larger absolute tax benefit, but the Florida property produces a better ratio of tax benefit to purchase price. When you factor in the absence of state income tax on ongoing rental income, the Florida property often wins on a 10-year after-tax basis despite the higher insurance costs.

For W-2 earners in particular, the STR loophole combined with cost segregation in a no-income-tax state can produce year-one tax savings that exceed the down payment — effectively making the government subsidize the acquisition.

Running the Scenarios

This is where Overline fits. Investors can use Overline to instantly run cost segregation scenarios on properties that have been sitting 9+ months, modeling exactly where the purchase price needs to land to offset current rates, elevated insurance, and compressed occupancy. Instead of guessing whether a $340,000 offer on a 10-month listing makes the math work, you can see the year-one tax impact, the 5-year cash flow projection, and the exit scenario in minutes. Run your numbers with the cost seg estimate tool.

Our cost segregation benchmarks show what typical accelerated allocations look like across property types, so you can validate whether the study you receive is reasonable. And our high-income STR tax strategy guide walks through the full playbook for investors earning $250K+ who want to use STR acquisitions as a tax offset.

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Key Takeaways

1. Transaction volume is at a 30-year low, but for different reasons than 2008. Sellers who are listing are disproportionately motivated.
2. Target properties sitting 9+ months. The carrying cost pressure is real, and discounts of 15-25% from list price are being accepted.
3. Market selection matters more than ever. Oversupplied markets (Florida, Smokies, Austin) offer pricing opportunities; undersupplied markets (Northeast, Colorado mountains) offer pricing power.
4. Underwrite conservatively. Use 52-56% national average occupancy, not the 70%+ that STR gurus project.
5. Factor in state tax burden. A no-income-tax state can save $30,000+ over a 10-year hold compared to a high-tax state.
6. Integrate tax strategy into acquisition analysis. With 100% bonus depreciation restored, the year-one tax benefit of cost segregation can materially change the effective purchase price.
7. Regulation can be a moat, not just a risk. Permitted properties in cap markets carry a structural premium.

The current market rewards patience, precision, and data-driven analysis. The investors who treat this as a surgical exercise — not a shopping spree — will build the most durable portfolios.

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Overline delivers engineered cost segregation studies for short-term rental properties starting at $499. If you are evaluating an STR acquisition and want to see the full tax-adjusted return before making an offer, run a free estimate here.