Where STR Supply Is Growing Too Fast in 2026: The Markets Investors Should Watch for Oversaturation

Indianapolis added 1,036 new short-term rental listings between January 2024 and January 2025, a 23.8% jump in supply. During the same period, average occupancy in the market sat at 37.3%. That means more than six out of every ten available nights went unbooked, and the market just added nearly a quarter more inventory on top of that.

If you think of STR supply like seats in a restaurant, Indianapolis just added a new dining room while the existing tables were already half-empty most nights. That is what oversaturation looks like in the data, and Indianapolis is not alone.

StaySTRA tracks listing counts, occupancy rates, and average daily rates across hundreds of U.S. markets. When we compare supply growth (how fast new listings are entering a market) against demand signals (occupancy and ADR), a clear pattern emerges: some markets are absorbing new supply without breaking a sweat, while others are showing textbook compression. For investors evaluating where to buy their next property, this distinction is the difference between a performing asset and an expensive lesson.

The Markets Where Supply Is Outrunning Demand

National STR supply grew 4.6% from April 2024 to April 2025, adding roughly 63,000 net new listings to the U.S. market (StaySTRA data, 1.45 million tracked listings). That national average, though, hides enormous variation at the market level.

Here are the markets showing the strongest oversaturation signals, where supply growth significantly exceeds the national rate while occupancy remains below 55%:

Source: StaySTRA database, listing count snapshots January 2024 vs. January 2025; occupancy and ADR averaged Q1 2025.

What These Numbers Are Telling Us

Stay with me here, because the story gets more specific when you look at each market individually.

Indianapolis is the starkest example. The market grew from 4,354 to 5,390 tracked listings in a single year. That 23.8% growth rate is more than five times the national average. Yet occupancy is just 37.3%, and average monthly revenue per listing lands at $1,538. For context, a $1,538 monthly revenue figure on a property with a mortgage, utilities, cleaning costs, and platform fees leaves almost nothing for cash flow. An investor buying into Indianapolis today is entering a market where three-quarters of the competition is already underperforming.

Nashville continues the pattern that our market type revenue benchmarks flagged: the city added 369 net new listings (14.8% growth) while occupancy compressed to 46.9%. Nashville’s saving grace is a relatively strong ADR of $259, but even that represents pricing power erosion from the $322 ADR the market commanded in mid-2024. Think of it like a store that keeps discounting: more customers might walk through the door, but each one is spending less.

Jersey City grew 20.6% as investors positioned for FIFA World Cup 2026 spillover from Manhattan. The gamble may pay off this summer, but the underlying market fundamentals (46.5% occupancy, $205 ADR) suggest that post-event, many of these new listings will compete for a shrinking demand pool.

Broken Bow, Oklahoma is a fascinating case. This cabin-heavy market in southeast Oklahoma exploded in popularity during the pandemic and has not stopped adding supply since. At 3,933 listings with just 39.7% occupancy, the market has nearly four times the inventory it can keep booked. The high ADR ($364) reflects luxury cabin product, but the math only works if you can maintain 50%+ occupancy, and most operators cannot in a market this saturated.

The Supply-Constrained Markets Where the Math Still Works

Now here is the other side of the coin, and it is worth spending time on because it shows what healthy supply-demand balance actually looks like in the data.

These markets grew their supply by less than 3% (some actually contracted) while maintaining occupancy above 75%. The result: significantly higher revenue per listing, stronger pricing power, and a competitive environment where new entrants can still succeed if they buy right.

Source: StaySTRA database, listing count snapshots April 2024 vs. April 2025; occupancy and ADR averaged Q1 2025.

Why These Markets Are Holding Strong

The pattern here is not complicated, but it is important to name: these markets are supply-constrained by design. Regulatory permit caps (Key West limits STR licenses), geographic limitations (Steamboat Springs has finite buildable land in a mountain valley), high barriers to entry (Palm Springs and Scottsdale properties command premium acquisition costs), and established tourism demand that fills rooms regardless of season.

Look at the revenue gap. Steamboat Springs generates $11,203 in average monthly revenue per listing. Indianapolis generates $1,538. That is a 7.3x difference, and it flows directly from the supply-demand balance in each market. As I detailed in our analysis of markets where hotels cannot compete, many of these supply-constrained destinations have structural demand advantages that protect incumbent operators.

From my desk here in Santa Fe, where I have watched 40 years of real estate cycles unfold across the mountain West, the lesson is always the same: the markets where it is hardest to add new supply are the markets where existing operators sleep best at night.

The Tipping Point: When Does Supply Growth Become Dangerous?

Looking across all 200+ markets StaySTRA tracks with more than 800 listings, a pattern emerges in the data:

• Below 5% annual supply growth: Occupancy tends to hold steady or improve, especially in markets with strong demand drivers. Properties here compete on quality, not price.
• 5-10% annual supply growth: Occupancy may dip 2-5 percentage points, but ADR typically holds. Well-operated properties still perform. This is the “watch” zone.
• 10-15% annual supply growth: Both occupancy and ADR begin compressing. Operators start cutting rates to maintain bookings. This is the zone where new investors face elevated risk.
• Above 15% annual supply growth: Occupancy compression accelerates. Revenue per listing declines. The market is adding inventory faster than travelers are discovering it. Without a major demand catalyst (like a World Cup or new convention center), the math deteriorates for everyone.

I want to be careful not to paint with too broad a brush. A market growing at 15% with a major event on the horizon (hello, FIFA World Cup cities) is a different proposition than a market growing at 15% because new construction is cheap and regulations are lax. Context matters. But the 15% threshold is where my eyebrows go up, and you should pay attention when yours do too.

How to Run Your Own Supply Saturation Check

You do not need to take my word for which markets are oversaturated. Here is a three-step framework you can apply to any market you are evaluating, using publicly available data and the StaySTRA analyzer.

Step 1: Measure Supply Trajectory

Pull the active listing count for your target market today, then compare it to the count from 12 months ago. You are looking for the percentage change. If it exceeds 15%, you are in elevated risk territory. If it exceeds 20%, proceed with extreme caution regardless of what other metrics show.

Step 2: Check Occupancy Direction

Compare current occupancy to the same period one year ago (seasonality makes month-to-month comparisons misleading). If occupancy is flat or rising despite supply growth, demand is absorbing the new inventory. Good sign. If occupancy is falling while supply grows, the market is not generating enough new demand to fill the new listings. That is compression in action.

Step 3: Test ADR Stability

ADR is the last domino to fall. When hosts start cutting rates to maintain bookings, that is the market signaling that pricing power has shifted from operators to guests. Compare your target market’s ADR to 12 months prior. A decline of more than 5% in a growing-supply market is a confirmed oversaturation signal. Nashville’s ADR dropped from $322 in mid-2024 to $259 in Q1 2025, a 19.6% decline. That is not seasonal variation. That is a market repricing itself downward as competition intensifies.

If all three signals fire (supply growth above 15%, occupancy declining, ADR falling), the market is oversaturated for new entrants. It does not mean existing operators will fail. It means the risk-adjusted return on new investment capital has deteriorated, and your DSCR underwriting needs to account for lower-than-historical revenue projections.

What Investors Should Do With This Information

I am not in the business of telling anyone where to invest. But I am in the business of making sure the data is visible before you write a check.

If you are looking at Indianapolis, Jersey City, or Nashville right now, ask yourself: what demand catalyst would need to materialize for occupancy to climb back above 55% given current supply? If the answer requires hope rather than data (hoping a convention center gets built, hoping a new employer moves in), that is useful information.

If you are looking at supply-constrained markets like Steamboat Springs or Scottsdale, the acquisition cost is higher, but the competitive landscape is more forgiving. These markets have fewer operators chasing the same guests, which means your property does not need to be perfect to perform.

The middle ground exists too. Markets like Anaheim (13.8% supply growth, 69.9% occupancy, $364 ADR) and Fort Worth (9.7% growth, 54.7% occupancy) show that growth alone is not fatal. When demand fundamentals are strong (Disneyland traffic for Anaheim, DFW metro expansion for Fort Worth), new supply can be absorbed. The question is always whether the demand story is real or whether you are arriving late to a party that already ended.

We do our best to keep our data accurate and up to date, but markets move fast and we are only human. Always verify current figures directly with local sources before making investment decisions.

Run the Numbers Before You Buy

The STR market in 2026 is not uniformly oversaturated, and it is not uniformly healthy. It is a patchwork of local markets with wildly different supply-demand dynamics, and the data tells you exactly which category your target market falls into.

Use the StaySTRA analyzer to pull current listing counts, occupancy trends, and revenue benchmarks for any market you are evaluating. The three-step saturation check takes ten minutes and could save you from buying into a market where the competitive landscape is already working against you.