Is a Decline in Tourism Triggering a U.S. Housing Crash?

As tourism continues to slow in the US, there are many who see reason for concern. Key factors, such as a flood of short-term housing entering the market, have analysts worried. The tourism sector is a billion-dollar industry that helps drive the economy of the US forward. Here’s how a decline in tourism could result in the housing bubble bursting.

The Numbers Don’t Lie – Decline in Tourism

Tourism and the housing market are cooling in certain regions of the US. This situation has led many to conclude that there is a correlation between the two. Notably, tourism is big business in the nation. To put its impact into perspective, in 2024, tourism accounted for $2.6TN in economic activity while also supporting +20M jobs across the US.

The benefits that tourism brings don’t stop there either. Tourism provides much-needed funding for the government. It generates billions in tax revenue from taxing these activities. Specifically, the US government secured $585 billion in tax revenue last year alone. That’s nearly 7% of all tax revenue collected.

U.S. Alone Faces Sharp Decline in Global Tourism

According to the World Travel & Tourism Council (WTTC), the US is in the midst of a major drop in international tourism. The report shows an 8.2% decline in this sector of the tourism industry. Notably, domestic tourism now accounts for 90% of the total US sector.

This decline in tourism will have a resounding effect on a multitude of industries. For one, the drop in tourism translates to a projected loss of $12.5 billion in international visitor spending in 2025 alone. The same study showed that the US tourism sector retracted by 22.5% compared to its last market peak.

Interestingly, the US is the only one of 184 economies projected to experience such a sharp decline in tourism. This sudden loss of interest by foreigners in visiting the US can be attributed to many causes. Here are some of the main culprits slowing tourism currently.

Un-Welcome Mat

One of the main issues causing international tourists to skip the US is a renewed push towards national pride and restricting the borders. The increased security and scrutiny can make entering the US a real hassle for many people compared to other nations.

Already, the border patrol and customs agents have begun a new policy of searching phones. In these digital searches, agents will go through a person’s personal cell phone and social media to determine if they have made any controversial or negative remarks about the nation or politicians. In one instance, a visitor was denied access for sharing a meme that featured Vice President JD Vance as a baby.

Strained Relations with Neighbors Impact Tourism

Another major reason why the tourism numbers are in decline is that the US has become more rigid with its neighbors. The country’s stance on trading and immigration has changed significantly from that of the previous administration. The Trump white house seeks to utilize different tactics, such as tariffs, to get its neighbors to act accordingly. Sadly, this approach has led to many feelings that are not wanted in the US.

Canada

The US and Canada have long been both economic and military allies. However, their friendship has been strained lately due to a variety of factors, including tariffs and inflamed rhetoric. These factors have led to a stark drop in Canadian tourism.

According to reports,  both land and air crossings into the US have declined. Land crossings reported a 28% decline, whereas air travel reduced by 13.3% in 2025. This noticeable decrease in Canadians traveling to the US has disproportionately affected certain regions of the US, like Florida, which has long been a Canadian travel hotspot.

Mexico

The US’s neighbor to the south, Mexico, is another country that has seen a sharp decline in tourists going to the US. Some of the main reasons why Mexicans have started to travel to other nations are in response to harsh new immigration policies. Many feel discriminated against by ICE and other government agencies tasked with targeting illegal immigrants.

Additionally, the Mexican economy has been on the rise, leading to more job opportunities and more domestic spending. When you couple this growth with a shrinking US economy. It is not surprising to learn that more Mexicans are leaving than entering the US.

Strong US Dollar

Another crucial component that led to shrinking tourism is the strength of the dollar. When the US dollar is strong, it holds more value internationally. As such, US citizens can travel globally and get more value for their currency than if someone were to travel to the US. Sadly, some travelers can find that their wealth is gobbled up in simple conversions, making it very expensive to visit the nation during these times.

How the Decline in Tourism Contributes to the Risk of a Housing Crash

Fewer people are traveling to the US, and less revenue is generated in tourist-dependent economies. These regions have been built to cater to a certain number of visitors yearly. Their local economy runs on projects that support this number remaining the same or improving.

When the tourism numbers drop sharply, it leads to businesses taking losses, jobs being cut, and the value of properties in the region shrinking. Notably, the connection between housing and tourism becomes more relevant when you examine what areas are feeling the housing crunch already.

Notably, the Southern and Midwestern states are feeling the crunch. Their housing prices have begun to decline by double-digit percentages in some key areas. These drops were driven by a sudden surge of housing inventory.

Short-Term Rental Market Failures

Airbnb and other short-term rental options became major contributors to rising house prices since their launch. Originally billed as a way for the average person to make extra income on their properties, it has now blossomed into a corporate-controlled sector with a few major contenders owning hundreds of homes.

As revolutionary as Airbnb has been, it’s not without its issues. For one, in areas where tourism has slumped, such as the west coast of Florida, Airbnb hosts have found themselves stretched to the limit. The competitive nature of the area and rising overhead have combined to put many of these Airbnb hosts out of business.

Additionally, rising interest rates have contributed to some Airbnb homeowners being unable to fulfill their bank commitments. Those holding adjustable-rate mortgages have seen their monthly payments balloon over the last few years. These scenarios put stress on Airbnb hosts, leading to many relisting their properties in an attempt to recoup losses.

In these areas, the flood of short-term rentals into the market has resulted in prices declining. This oversupply is even more detrimental to the market because these are homes that are fully remodeled and have lots of investment capital in them. Consequently,  many sellers are overextended and are desperate to offload their properties before their credit takes a hit.

Housing Bubble

The real issues begin when sellers can’t pay their mortgage any longer. These homes then go back to the bank, which will again put them on the market. However, this go-around, there will be low-priced foreclosures, further driving the housing oversupply up while cutting sale values across the region.

Developers Feeling the Crunch from the Decline in Tourism

Evidence of this housing crunch can be seen across more than just the tourist and travel sectors. The construction economy has had a significant pullback in activity due to the flood of fully remodeled short-term rentals in these regions. According to reports, there are several areas where new home construction is at its lowest level in decades.

The data regarding this slowdown is eye-opening. It reveals that the majority of construction cooling is around the single-family home sector. Single-family home construction is down 12% compared to 2024, and signs seem to show this trend will expand and continue in neighboring regions. This data suggests that developers have chosen to wait out the market uncertainty rather than build and hope for the best.

How Technology Could Help the Market Recover

The rising price of homes is due to more than just a fall in tourism. However, it’s a contributing factor that must be accounted for when discussing how to rectify the situation. One option would be to find a way to reduce the price of creating new homes.

Technologies like 3D printed housing could transform the market moving forward. This option would enable entire communities to be created using advanced designs that reduce the need for cooling systems and other power-hungry add-ons. In this way, developers could seek to offset housing woes.

Help Airbnb Owners Better Understand the Market

Another key way in which technology could help to stimulate the housing economy is through AI-powered market analysis and pricing systems. These advanced algorithms take into account key factors such as competitors, time factors, and demand to help hosts achieve maximum occupancy.

Advanced AI systems can integrate a massive amount of data to provide a comprehensive overview and market forecast.  This technology could help homeowners better determine if it’s time to repurpose the property or sell it.

Travel Tech

There are also a variety of travel technologies that have the potential to help drive tourism. These tools include everything from AI itinerary systems that can help you map out a fun day around town to protocols designed to help hosts target specific niche travel sectors. For example, you could set up your AI marketing system to scan for large medical seminars in your area to seek out medical tourists.

Redefine Real Estate Market Practices

Artificial intelligence isn’t the only tech that can redefine market practices. Blockchain technology provides a host of benefits that make it ideal for the real estate market. These options include fractional ownership, where a property is split into more affordable tokens and sold.

This approach enables homeowners to secure more funding and investors to diversify their holdings. It also reduces the financial barrier for new investors to enter the market. Keenly, tokenized properties can be transferred more easily than traditional options.

Investing in Innovative Real Estate

Many innovative companies are operating within the tourism and real estate sectors. These firms continue to experiment with advanced tech like virtual reality to streamline crucial market processes. Here’s one company that pushed the boundaries of tech innovation with its unique business model.

CoStar Group

NASDAQ-listed CoStar Group (CSGP -5.86%) is a leading provider of online real estate marketplaces, information, and analytics. In February 2025, the company significantly expanded its technology capabilities by acquiring Matterport, a pioneer in creating immersive 3D digital twins of real-world spaces.

Through Matterport’s offerings—such as the Pro 3D camera with integrated Lidar and its AI-powered Cortex platform—CoStar now provides real estate professionals with cutting-edge virtual tour solutions that boost property marketing and streamline sales processes. This integration strengthens CoStar’s position across commercial and residential markets, enabling clients to benefit from both advanced visualization tools and industry-leading property data.

Those seeking a tech-driven real estate investment with both robust analytics and immersive property technology may want to research CoStar Group shares further.

Decline in Tourism is a Wake-Up Call

The WTTC President & CEO, Julia Simpson, called her group’s data a serious “wake-up call for the U.S. government.” She explained that as the world’s largest travel and tourism economy, it’s vital that the government do what needs to be done to reverse this troubling trend. She has even gone as far as to state that the US appears to be shunning visitors, all while other nations are “rolling out the welcome mats.”

Is a Decline in Tourism Resulting in a Housing Crash?

When you examine the data, you can see that a decline in tourism is a crucial factor in the housing bubble beginning to show signs of weakness. However, it’s not the only factor, as high interest rates, declining employment, and market uncertainty all played roles in the current situation. Now, the government will need to revamp its strategy before the tourism economy gets hit beyond repair.

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