BiggerPockets Real Estate Podcast Summary

Episode: It’s About to Get Good! (2025 Housing Market Predictions)
Release Date: January 3, 2025
Host: Dave Meyer, Head of Real Estate at BiggerPockets

Introduction

In the January 3, 2025 episode of the BiggerPockets Real Estate Podcast, host Dave Meyer sets an optimistic tone for the real estate investing community. After acknowledging the challenging years preceding 2025, Meyer expresses confidence that the real estate market is turning a corner, signaling better days ahead for investors aiming for financial independence through real estate.

Key Points:

• Optimism for 2025: Dave Meyer feels more positive about the real estate market in 2025 compared to previous years.
• Focus of the Episode: The episode primarily focuses on setting expectations for 2025, covering mortgage rates, housing prices, and rental market predictions.
• Upcoming Content: Meyer hints at future episodes that will delve deeper into why real estate remains a solid investment in 2025 and beyond.

Market Overview: Turning the Corner

Dave Meyer begins by providing a high-level overview of the current real estate market, suggesting that the industry is near the bottom of its housing cycle.

Notable Quotes:

• “I think we are close to the bottom for this housing cycle.” [00:00]
• “We are starting to bottom out and heading towards better days ahead.” [00:00]

Insights:

• Housing Cycles: Meyer explains that real estate markets operate in cycles—rising, peaking, declining, and then reaching a trough before recovering.
• Cautious Optimism: While acknowledging that the market has faced confusion and difficulty, Meyer believes that the worst is behind us, though improvements won't be immediate or drastic.

1. Mortgage Rate Predictions

Meyer emphasizes the critical role mortgage rates play in determining housing affordability, which in turn affects both supply and demand in the housing market.

Current State:

• Mortgage Rates: As of mid-December 2024, mortgage rates stand at 6.8% for owner-occupied loans.

Key Factors Influencing Mortgage Rates:

• Bond Market Dynamics: Mortgage rates are heavily influenced by bond investors. Factors such as inflation fears and stock market performance significantly impact bond yields, which in turn affect mortgage rates.
• Federal Reserve Influence: While the Fed's actions influence mortgage rates, bond investors consider broader economic factors beyond just Fed policies.

Notable Quotes:

• “Affordability is the name of the game.” [02:30]
• “I believe rates will come down, but they’re going to stay in the sixes next year.” [04:00]

Predictions:

• Rate Decline: Meyer forecasts a modest decline in mortgage rates, expecting them to settle in the low to mid-six percent range by early 2026.
• Rate Stability: He cautions that while rates may decrease, they won’t reach the lower thresholds (5-5.5%) needed to significantly enhance affordability and market dynamics.

Implications:

• Affordability Improvement: Even modest rate reductions can improve affordability, potentially increasing demand slightly.
• Investor Perspective: Rate relief, though not dramatic, is viewed favorably as it provides some breathing room for investors navigating high-rate environments.

2. Housing Price Predictions

Building on the foundational role of mortgage rates, Meyer explores the anticipated movements in housing prices for 2025.

Demand and Supply Dynamics:

• Low Affordability: High mortgage rates have reduced homebuyer demand, as fewer individuals can afford to purchase homes.
• Lock-In Effect: Homeowners are reluctant to sell their properties due to the difficulty in affording new ones, thus limiting market supply.

Key Statistics:

• Priced Out: Over 100 million American households are currently priced out of the housing market according to the National Association of Homebuilders.
• Renters' Desire: Approximately 90% of American renters under 45 aspire to homeownership but are constrained by affordability.

Notable Quotes:

• “Affordability is a huge lever in the demand side of the equation.” [06:45]
• “My forecast range for home price appreciation on a national basis is 1 to 5% year over year growth.” [14:30]

Predictions:

• Moderate Appreciation: Meyer anticipates national home prices to appreciate between 1% to 5% in 2025, aligning with normal inflation rates (projected at 2-3%).
• Regional Variations: While some markets may experience stable or slight declines (particularly those with significant new construction), others with steadier demand may see moderate growth.

Influencing Factors:

• Mortgage Rates: Continued high rates support stable or modestly increasing home prices by curbing excessive demand.
• Construction Trends: New permits and construction rates will influence supply. Meyer notes an expected stabilization in new construction permits, which could support more balanced supply-demand dynamics.
• Economic Policies: Potential tax cuts and tariffs introduced by the incoming Trump administration could impact the housing market, though the extent remains uncertain.

Additional Insights:

• Foreclosure Rates: Currently, mortgage delinquencies are at their lowest since 1979, negating fears of a crash due to widespread foreclosures.
• New Construction Impact: While new construction is up slightly, it constitutes a minor portion of the overall market and is unlikely to drastically shift price dynamics.

3. Rent Price Growth Predictions

Meyer divides the rental market into two segments: multifamily properties and single-family homes/small residential properties.

3.1. Multifamily Rental Market

Current Trends:

• Pandemic Surge: Multifamily rents surged by 10% in 2022 but have since flattened, with recent reports indicating a 1% decline.
• Regional Disparities: Rents remain stable or slightly increasing in some Midwest cities (e.g., Cleveland, D.C.), while declining in overbuilt Sunbelt markets like Austin and Raleigh.

Key Influences:

• Overbuilding in Hot Markets: Rapid construction of multifamily units in high-growth areas has led to an oversupply, forcing landlords to lower rents to attract tenants.
• Upcoming Construction Completion: A significant influx of new apartments is expected to hit the market in 2024-2025, exacerbating the oversupply problem temporarily.

Notable Quotes:

• “Multifamily rents are somewhat flat, a little bit negative nationally, and more negative in some of these more hot markets.” [17:00]
• “By most estimates, we are somewhere between 1 and 7 million homes short in the United States.” [19:00]

Predictions:

• Short-Term Flatness: Rents in multifamily properties are expected to remain flat or experience slight declines during the first half of 2025 due to the lagging effect of recent overbuilding.
• Long-Term Improvement: As new multifamily construction stabilizes and supply growth slows, rents are anticipated to begin increasing again, with significant growth expected around 2026.

Future Outlook:

• Balanced Supply: Meyer anticipates that construction rates will drop substantially by mid-2025, helping to balance supply and demand and eventually support rent growth.
• Long-Term Growth: Over a five-year horizon, significant rent appreciation in multifamily properties is projected as the housing shortage becomes more pronounced.

3.2. Single-Family and Small Residential Rentals

Current Trends:

• Rising Rents: Single-family and small residential rents are currently increasing by 4-5%, outpacing inflation and supporting investor profitability.

Key Influences:

• Demand Stability: With multifamily rents stabilizing or declining in certain markets, single-family rentals benefit from continued demand driven by their appeal and relative scarcity.
• Affordable Housing Gap: The nationwide shortage of 1 to 7 million homes maintains strong demand for existing single-family rentals.

Notable Quotes:

• “Single-family rents are actually up right now. They’re up like 4 or 5%, depending on who you ask.” [21:00]
• “I think rent growth is going to be pretty good in 2026 and beyond.” [21:35]

Predictions:

• Moderate Growth: Single-family and small residential rents are forecasted to grow by approximately 3% in 2025, maintaining alignment with inflation and supporting investor incomes.
• Regional Resilience: Markets with limited new single-family construction will likely see continued rent increases, whereas areas facing slight oversupply may experience more restrained growth.

Overall Rental Market Predictions for 2025:

• Single-Family Rentals: +3% rent growth
• Multifamily Rentals: Approximately +1% or flat
• National Average: Combined rent growth around 3%, with single-family equilibrating the lower multifamily figures.

4. Influencing Factors and X-Factors

Beyond mortgage rates, housing prices, and rent growth, Meyer identifies additional factors that could influence the 2025 real estate market.

4.1. Economic Policies Under Trump's Second Term

Tax Policies:

• Potential Tax Cuts: Trump’s administration may extend or expand the 2017 tax cuts, potentially providing economic stimulus that could benefit the housing market.
• Real Estate Investor Benefits: Possible tax incentives specific to housing and real estate investments remain speculative but could bolster investor interest and market activity.

Tariffs:

• Uncertain Impact: The implementation of tariffs on construction materials or other sectors could affect housing supply and costs. The actual impact hinges on the specifics of any tariffs enacted.
• Market Dependency: Tariffs targeting essential construction inputs could constrain new building, indirectly supporting housing supply balance and price stability.

Notable Quotes:

• “These tariffs could impact the housing market depending on the details of the policies.” [16:50]
• “I think they are unlikely to have a huge impact in 2025, but it’s something that could... if implemented quickly and aggressively, affect the housing market.” [16:50]

Implications:

• Limited Immediate Effect: Meyer anticipates that while economic policies could influence the market, their immediate impact in 2025 might be minimal unless they are drastic and swiftly implemented.
• Monitoring Needed: Investors should stay informed about policy developments as they can present both risks and opportunities for the housing market.

4.2. Construction Trends

Current State:

• New Construction: Construction completions have increased but represent a small fraction (10-20%) of the total market.
• Permit Trends: New permits for building are declining, suggesting a future slowdown in new construction.

Predictions:

• Stabilizing Supply: As new construction normalizes and construction starts slow down, the market will avoid oversupply, supporting price and rent stability.
• Impact on Prices: Reduced new construction will help maintain or slightly increase housing prices by easing supply pressures.

5. Comprehensive Forecast and Conclusion

Meyer consolidates his forecasts, integrating the interplay of mortgage rates, housing prices, and rent growth to outline his expectations for the 2025 real estate market.

Final Predictions:

• Mortgage Rates: Low to mid sixes (approximately 6.0% - 6.5%) by early 2026.
• Home Prices: 1% to 5% national appreciation, aligning with normal inflation trends.
• Rent Growth: Approximately 3% overall, with single-family rents rising around 3% and multifamily rents around 1%.

Key Takeaways:

• Affordability as a Central Theme: Mortgage rates remain the linchpin for housing affordability, directly influencing both supply and demand dynamics.
• Stable Growth Outlook: While the market won't experience explosive growth, steady and manageable increases in home prices and rents offer a favorable environment for cautious investors.
• Market Balance Anticipated: An expected moderation in new construction and potential economic policy shifts are likely to create a more balanced and sustainable housing market.
• Strategic Investor Positioning: Investors should focus on areas with stable demand, limited new construction, and favorable economic policies to maximize their returns.

Notable Quotes:

• “This is what I think is going to be a great year for real estate investing.” [21:50]
• “Keep pacing with inflation, which is great for investors.” [21:30]

Conclusion: Dave Meyer concludes the episode by reinforcing his optimistic outlook for 2025, emphasizing that the foundational elements of the real estate market are stabilizing after a period of volatility. He encourages listeners to stay engaged with the podcast for ongoing strategies, tactics, and insights to navigate the evolving market landscape effectively.

Closing Remarks:

• Upcoming Content: Meyer promises more in-depth discussions on real estate strategies and long-term growth prospects in future episodes.
• Call to Action: Listeners are urged to subscribe to the podcast on various platforms and stay tuned for continued guidance on achieving financial independence through real estate investing.

Additional Notes

Throughout the episode, Dave Meyer provides a data-driven analysis of the 2025 housing market, supported by current statistics and future projections. His candid approach aims to equip real estate investors with the knowledge needed to make informed decisions in a market poised for gradual improvement.

Advertisements and Sponsored Messages:

• The transcript includes several advertisements from sponsors like Fundrise, Airbnb, BAM Capital, Host Financial, NerdWallet, and TurboTax.
• These segments are informational but were excluded from the summary as per the user's instructions to focus solely on content-driven sections.

Conclusion

This episode of the BiggerPockets Real Estate Podcast offers a cautiously optimistic forecast for the 2025 housing market. By dissecting key components such as mortgage rates, housing prices, and rental growth, Dave Meyer provides valuable insights for investors looking to navigate the current landscape. The anticipated stabilization and gradual improvement in these areas suggest a favorable environment for real estate investment, positioning 2025 as a potentially rewarding year for those seeking financial independence through property.