The short-term rental investment surge that defined much of the pandemic-era real estate market has ended in coastal Florida, according to a local agent monitoring the trend. The primary reason is not regulation or oversupply alone, but a decline in returns as property prices have outpaced rental income growth.
“We’re seeing fewer Airbnbs. The market is saturated, and higher prices have made Airbnb income far less compelling,” says Zach DiFilippo, a Realtor with Coldwell Banker Premier Properties in St. Augustine. “So the margins for those short-term rentals have shrunk to a point that doesn’t make sense to buy a $1.1 million house near the beach that’s bringing in $80,000 a year.”
DiFilippo explains that properties once purchased for $750,000 to $800,000 and generating $85,000 in annual rental income offered viable investment returns. Now, those same properties sell for $1.1 million or more, but rental income has not increased proportionately. As a result, the investment opportunity has disappeared.
The disappearance of the Airbnb investor marks a significant change in the buyer mix over the past 18 to 24 months, DiFilippo notes. “That investor really isn’t as heavy,” he says, describing a segment that was once a steady source of sales and competition for listings.
Market saturation has compounded the problem. As more homes entered the short-term rental market during the pandemic, each property faced greater competition for bookings. This increased supply has squeezed rental income potential while acquisition costs have climbed.
According to DiFilippo, the result is a split market with distinct trends by price range. “We’re seeing luxury still move, and then we’re seeing anything under $350,000, in my opinion, move fairly quickly,” he says. “But everything in the $350,000 to $600,000 or $650,000 range has been a little bit tougher to sell.”
The middle price range—where many would-be short-term rental properties fall—now faces the challenge of a diminished investor pool and competition from new construction, which often comes with builder incentives and favorable financing.
The decline in short-term rental investment is part of a broader shift in real estate decision-making, DiFilippo says. “Before that, during the COVID world and the low interest rate world, you didn’t have as much motivation because there was more affordability, more flexibility,” he explains. “People could just move if they felt like moving.”
During that period, buyers could justify slim cash flow returns based on expected appreciation and low interest rates. Now that rates have risen above the sub-3 percent range and prices have already captured much of the appreciation, investors demand properties that generate meaningful cash flow instead of relying on future price gains.
DiFilippo observes that today’s active buyers are motivated by real needs — job relocations, school changes, family reasons — rather than opportunistic investment. The second-home buyer segment remains, but mostly at the luxury level, where buyers can absorb higher costs without depending on rental income.
With investors stepping back, homes in specific price brackets are staying on the market longer. DiFilippo reports that properties priced between $350,000 and $650,000 are “sitting a little bit longer, more of that 80 to 100 day and 110 day mark,” while homes priced above and below that range are moving faster.
This has created challenges for sellers who bought during the market’s peak with investment goals in mind. These sellers now face a smaller pool of buyers and must shift their marketing to appeal to primary residence buyers, often requiring price reductions or other concessions.
DiFilippo’s experience suggests the short-term rental investment boom was a temporary phenomenon, driven by low interest rates, changes in travel patterns, and rapid home price appreciation. The return of the investor buyer segment will likely depend on a combination of lower interest rates, property price corrections, or a significant increase in rental income.
For now, DiFilippo says, agents and sellers must adapt to a market where investor-driven urgency has faded. Transactions are now driven primarily by buyers with genuine residential needs, rather than by those seeking to generate short-term rental income.
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