Were We Wrong About the Housing Market? (+ 2025 Predictions)

Summary

BiggerPockets Real Estate Podcast Summary

Episode Title: Were We Wrong About the Housing Market? (+ 2025 Predictions)
Release Date: December 27, 2024
Host: Dave Meyer
Panelists: Kathy Fecke, Henry Washington, James Dainard

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Introduction

In this insightful episode of the BiggerPockets Real Estate Podcast, host Dave Meyer, along with panelists Kathy Fecke, Henry Washington, and James Dainard, delve into a comprehensive analysis of their 2024 real estate predictions. They evaluate their accuracy, discuss Zillow’s forecasts, and share their outlook for the housing market in 2025. This episode is a must-listen for real estate investors seeking to understand past trends and future opportunities.

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Reviewing 2024 Predictions

Dave Meyer opens the discussion by acknowledging the challenges of predicting the housing market over the past year. The panel examines their individual predictions regarding home prices, recessions, and interest rates, highlighting both successes and missed targets.

• Home Prices:

  • Kathy Fecke accurately predicted a 4% year-over-year increase in home prices, aligning perfectly with data from Redfin. “You nailed this one,” Dave commends her at [18:06].
  • Henry Washington forecasted a range of 3-4%, which was largely accurate. “It's been a great year,” Henry reflects on his predictions at [19:14].
  • James Dainard anticipated a 2% decline, but the market remained flat, slightly missing his mark. “Better luck next year, man,” Dave teases James at [18:55].

• Recession Predictions:

  • Kathy Fecke predicted a recession by Q2 or Q3, which did not materialize. However, the panel notes varying perceptions among the public, with James Dainard observing a divided sentiment where “50% would say, we are absolutely in a recession” at [20:47].
  • Henry Washington suggested a technical recession with minimal public acknowledgment, which also did not occur.

• Interest Rates:

  • The panel unanimously underestimated the persistence of high mortgage rates. Kathy forecasted 6.5%, Henry at 6.75%, and James at 7%, closely aligning with actual rates around 7.05% as of the episode date. “Locked into my brain,” Henry exclaims at [33:06], highlighting the accuracy of their bearish outlook on rate declines.

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Evaluating Zillow’s 2024 Predictions

The discussion shifts to Zillow’s predictions for the housing market in 2024, where the panel scrutinizes each forecast:

1. Home Buying Costs Leveling Off:

   • Zillow’s Prediction: Costs would stabilize.
   • Outcome: Contrary to Zillow, affordability worsened with rising mortgage rates and home prices. “Zillow is wrong about this one,” Dave asserts at [04:26].

2. Increased Housing Inventory:

   • Prediction: More homes listed for sale.
   • Outcome: Accurate. Inventory rose by approximately 36%, validating Zillow’s forecast. “They got that right,” Kathy confirms at [06:23].

3. Starter Homes Becoming Single-Family Rentals:

   • Prediction: Starter homes would transition to rentals.
   • Outcome: This did not materialize as expected. The rise in rent-concessions and high ownership costs kept this trend at bay. “It's wrong,” Dave concludes at [07:00].

4. Stiff Competition for Downtown Rentals:

   • Prediction: Increased competition in downtown rental markets.
   • Outcome: The panel disagrees, noting slower rent growth in downtown areas due to ample multifamily supply. “This one's wrong,” Dave states at [08:00].

5. Fixer-Upper Homes Attracting Traditional Buyers:

   • Prediction: Traditional buyers would find fixer-uppers more appealing.
   • Outcome: Contrarily, high renovation costs and mortgage rates deterred traditional buyers, favoring investors instead. “No, no, no,” Kathy summarizes at [09:51].

Additional Zillow Predictions:

• Home Improvements by Owners: Likely true but difficult to measure accurately.
• Nostalgic Touches in Home Buying: Viewed as an odd prediction with minimal impact.
• AI Enhancing Home Search and Financing: Skeptical sentiment prevailed among panelists regarding its significant influence.

Overall Assessment: Zillow achieved a 50% accuracy rate, with notable missteps in key areas affecting home affordability and rental dynamics.

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New Predictions for 2025

Looking ahead, the panel shares their forecasts for the real estate market in 2025, encompassing home prices, mortgage rates, and promising investment markets.

Home Price Appreciation

• Consensus: Home price growth is expected to align with inflation, maintaining a steady 2-4% increase.
• Specific Predictions:
  • Kathy Fecke: Anticipates 3% annual growth.
    • “It's normal,” Kathy emphasizes at [29:46].
  • Henry Washington: Projects 2.5% increase.
    • “It's been there for months,” he remarks at [33:06].
  • James Dainard: Suggests 4% growth, considering millennial demand.
    • “You can't build that much supply in one year,” James explains at [30:58].
  • Dave Meyer: Concludes an average of 3.5%, noting “somewhat normal” market behavior at [29:32].

Mortgage Rates

• Panel Predictions:
  • Henry Washington: 5.95% [33:06]
    • “Locked into my brain,” he comments.
  • James Dainard: 6.5% [33:20]
    • “Pretty robust economy,” James states.
  • Kathy Fecke: 6.25% [33:46]
  • Dave Meyer: 6.12% [34:04]
    • Realistic compromise among panelists.

Conclusion: While some hope for lower rates persists, the panel realistically anticipates rates to remain in the low to mid-six percentage range due to economic factors and potential inflationary pressures.

Top Investment Markets for 2025

• Kathy Fecke:

  • Focuses on tertiary major metros like Cleveland, Birmingham, Kansas City, Pittsburgh, and Indianapolis for their affordability and appreciation potential.
    • “These places are affordability, but you also get appreciation,” Kathy elaborates at [38:35].

• Henry Washington:

  • Recommends Seattle and Arizona, despite perceptions of market bubbles.
    • “There's always opportunity in every market,” Henry asserts at [36:26].

• James Dainard:

  • Highlights Dallas-Fort Worth and Tampa-St. Petersburg, aligning with PricewaterhouseCoopers and Urban Land Institute’s rankings.
    • “Dallas, Fort Worth, and Tampa, St. Petersburg,” James shares at [35:48].

• Dave Meyer:

  • Advocates for suburbs outside major metros experiencing revival, referring to areas outside New York City and San Francisco, including Detroit and Madison, Wisconsin.
    • “Quality living is going to go up in them,” Dave predicts at [40:10].

Panel Insights:

• Kathy emphasizes affordability paired with growth.
• Henry believes in investment opportunities even within perceived bubbles.
• James and Dave support emerging markets with strong economic fundamentals.

---

Final Reflections and Conclusions

The panelists reflect on a successful year despite the complexities of the housing market. They commend Kathy for her accurate predictions and acknowledge James’s high earnings despite some forecasting misses. The discussion underscores the importance of adaptability and data-driven strategies in real estate investing.

• Kathy Fecke: “It's definitely the best we've ever done,” she concurs at [23:54].
• James Dainard: Highlights the profitability of his ventures, noting “he probably made the most money last year,” at [23:56].
• Henry Washington: Commends the market's performance, stating, “It was a good year,” at [24:08].

Closing Thoughts: Dave Meyer encourages listeners to engage with their upcoming live events and explore James’s new book, The House Flipping Framework, promoting continuous learning and community engagement within the BiggerPockets network.

---

Notable Quotes

• Dave Meyer [18:06]: “You nailed this one,” praising Kathy’s accurate home price prediction.
• Henry Washington [33:06]: “Locked into my brain,” reflecting on his mortgage rate prediction.
• James Dainard [35:48]: “Dallas, Fort Worth, and Tampa, St. Petersburg,” identifying top investment markets.
• Kathy Fecke [38:35]: “These places are affordability, but you also get appreciation,” emphasizing investment criteria.

---

This episode offers a thorough evaluation of past forecasts, providing valuable lessons and forward-looking insights for real estate investors aiming to navigate the evolving market landscape in 2025.

Transcript

[Henry Washington]

Foreign.

[Dave Meyer]

Hey, what's up everyone? It's Dave here wishing you and your family a very happy holiday season from everyone here at BiggerPockets. As we wrap up the year, we are resharing some of our favorite podcast episodes of 2024 on the feed. And today's show comes from our sister podcast, on the Market. I often refer to on the Market as a sister show to this podcast because it is very complimentary. We talk about all sorts of great real EST topics, tactics, strategies here. But on the Market is where me, Henry Washington, James Dainard, and Kathy Fecky basically just nerd out and talk about real estate news and economics. And if that sounds like fun to you, you can find on the Market on your podcast feed or on YouTube. Wherever you listen, make sure to hit that subscribe button. Today's episode that we're sharing with you is one that we published on the on the Market feed about a month ago. And and what we did was we looked back at our real estate predictions for 2024 to check what came true to call out some of the mistakes we made. And we also made some new predictions for 2025. So if you want to hear what James, Kathy, Henry, and I think is going to happen with interest rates or want to hear a few of the markets we think are going to heat up, just keep listening. In this episode, we even got James to finally go on the Record and make some real predictions for the coming year. As for this podcast, I will be back with new episodes in January, but for now, here's on the Market. A year ago, we made some bold declarations about what would happen in the housing market in 2024. And today we're going to talk about what we were wrong about, what we were right about, what Zillow was wrong about and right about. And we'll talk about what we think we have in store for 2025. Hey everyone, it's Dave. Welcome to on the Market for our predictions show. If you are new to listening to on the Market, this is a fun one for you to join. I am joined here today by my three favorite panelists, Kathy Fecke, James Dainard, and Henry Washington. Thank you three for joining us today.

[Kathy Fecke]

I bet you say that to all your panelists.

[Dave Meyer]

Well, it's fair to say that you're my favorite because you're the only three panelists, so you are all my favorite. How are you guys feeling? Kathy, do you even remember what you predicted last year?

[James Dainard]

Sure. No, I really don't.

[Dave Meyer]

Well, lucky for you, we have a producer who Went back and dug up everything we predicted. So we compare it and spoiler. James was wrong about everything, but the rest of us did pretty well.

[Henry Washington]

Or was I? Or was I?

[James Dainard]

You know what he's good at, though? He's good at predicting expenses and sales prices, and he nails it a lot.

[Kathy Fecke]

Return on investment. Yeah, yeah, yeah.

[Henry Washington]

Well, when you think the market's going down, your underwriting looks a lot better.

[Dave Meyer]

Well, I think something I didn't predict, I don't know about all of you didn't predict, but I just realized that as of today, all four of us released books this year because James's book came out today. The House Flipping Framework. James, congratulations on writing a book, man.

[Henry Washington]

Thank you. You know what? I gotta say, I never thought. And my wife says this to me all the time. She's like, how are you an author?

[Kathy Fecke]

That's how I feel.

[James Dainard]

I feel like you kicked and screamed a lot through this one, but you did it.

[Dave Meyer]

I think you asked me to write it for you, like, four or five different times, even though I've never flipped a house. You're like, just write it.

[Kathy Fecke]

Just write the book.

[Dave Meyer]

But seriously, man, congrats. That's awesome.

[James Dainard]

And like Henry said, I think we should do some predictions on how many sales you'll have. I think it's going to be triple mine, at least.

[Dave Meyer]

Yeah, I need to. I need to figure out what mine were for this year, and then I'll triple it. Yeah. Well, with that, let's move into our show today where we're going to talk about our predictions for next year. And I thought it would be fun before I put you all in the hot seat to actually make your own predictions. We'll warm up a little bit and just start with reviewing Zillow's 2024 predictions. So here we go. Zillow's first prediction for 2024 was, home buying costs will level off. I mean, did you guys notice that? Because I'm pretty sure they got more expensive.

[James Dainard]

Yeah. I love that we're picking on Zillow first. This is great. They were wrong. Just flat wrong there.

[Dave Meyer]

Yeah. So, I mean, affordability, which is the measurement of home buying cost, actually got way worse in the first half of the year when mortgage rates went up to about 8% and home prices continued to go up. And then just briefly, in September, it did get a little bit better, but mortgage rates have since shot back up. We're recording this in the middle of November. And so I would say Zillow is wrong about this one. Did you guys think that home prices were going to get cooler this year?

[Henry Washington]

Yeah, I did.

[Dave Meyer]

But did you think it was going to be cooler because of price declines, James, or mortgage rate declines?

[Henry Washington]

I thought everything was going to decline down just because, you know, the affordability and the cost of life has gotten so expensive. It just, you know, every piece of logic pointed to the housing was going to start declining a little bit. At least that's what I felt. You know, rates were almost at all time highs, pricing was at all time highs, and job wages had not gone up. And especially like in a lot of more expensive markets, like the tech market, everything, people aren't getting paid more and, you know, naturally people are making less and things cost more. I thought price was going to come down. So this was a little bit of a shocking year for me.

[Kathy Fecke]

I can see where you went wrong because I heard you say logic and reason was what you were using to make your decision, and that's probably not going to work in this economy.

[Dave Meyer]

Are you just doing the opposite thing? You're going to think about the logical thing that could happen and then just predict the opposite?

[Kathy Fecke]

Yeah. What's the dumbest thing in the world? And go, yeah, that's probably. That's probably what's going to happen.

[Dave Meyer]

Honestly, you might be right. It's like one of those octopi, like pick the World cup winners or whatever.

[Kathy Fecke]

When the dog picks the NCAA champion. It's kind of like that.

[Dave Meyer]

Yeah, yeah, exactly. All right, so I think Zillow was off on that one. Their second prediction was more homes will be listed for sale. Kathy, I'm quizzing you. Do you know if that was right or wrong?

[James Dainard]

That was. That was right. We had increased inventory by. I forget how much, but 20, 30%, maybe 36%. So. Yeah, they got that right.

[Dave Meyer]

Yes, they did. As of right now, according to Redfin, at least, the new listings are up a couple of percentage points. But inventory, as Kathy was said, is even higher, which is a measurement of how many homes are for sale at any given point. So Zillow will give you credit for that one. The third thing that they predicted was the new starter home will be a single family rental. I don't even know what that means. What does that mean?

[James Dainard]

I think that means that you can't buy a house, you have to rent it, perhaps.

[Dave Meyer]

Oh.

[James Dainard]

Or they're saying that if you can't afford your house where you live, you'll buy a rental somewhere else. I don't know. But either way, either way, it's wrong.

[Dave Meyer]

Well, I did see something the other day that the average homebuyer age has gone up seven years this year. Like it used to be, I think. Yeah, around 30, and now it's 37. So that might be an indication that people are continuing to rent rather than buying a starter home, if that's what Zillow even meant by this one.

[James Dainard]

Well, there's just the difference. Difference between renting a home and owning. It was so, so dramatic that, honestly, it didn't make sense for a lot of people to buy when they could rent the same house for, you know, half. I don't know exactly how much, but for much less. So.

[Kathy Fecke]

And a lot of people who bought during the pandemic were really hit hard this past year with increases in insurance and taxes, and that really helped kill the affordability.

[Dave Meyer]

That's definitely true.

[James Dainard]

I mean, just to give an example, I'm. I'm helping my sister, who has had some. A lot of health issues, and she' renting a house. That would be a $2 million house, probably in the San Francisco Bay Area, and The rent is 5,000. I know this sounds like a lot, but for the Bay Area, it's really not. But think about what the mortgage would be on that.

[Dave Meyer]

Like, 15 grand easily make no sense to buy it.

[James Dainard]

So.

[Henry Washington]

Yeah.

[Kathy Fecke]

Isn't a $2 million house in the San Francisco Bay Area a parking spot?

[James Dainard]

It is a very old, very dilapidated home.

[Kathy Fecke]

Yeah.

[Dave Meyer]

All right, so for Zillow's fourth prediction was expect stiff competition for rentals near down. I'm just gonna go ahead and say this is wrong, because I don't know for sure. I don't have this data. But downtowns have grown slower in rent and home prices than suburban areas. So if I had to guess where we are seeing slower rent growth, it's probably in downtowns. That's where all the multifamily supply is online, too. So I'm gonna, without data, say that this one's wrong. Unless one of you disagrees.

[Henry Washington]

That's exactly what I'm seeing in our market. A lot of the newer product that's coming to market, they perform at very high rents, and those are the ones we've seen not be competitive. And they're giving away a lot of rent concessions just to get them filled. It's like the B stuff, the renovated stuff's moving a lot faster because it's just a little bit more affordable in my market.

[Kathy Fecke]

This is true. Absolutely.

[Dave Meyer]

Okay, well, given that I just made up whether this was true or not, I appreciate you providing some anecdotal evidence to what you're saying here. All right, so Dylan's made a bunch more predictions, but I'm just going to do one more. Henry and James, I'm particularly curious in your opinion on this one. Fixer upper homes will become more attractive to traditional buyers, so not investors. James, have you seen that? Or you're shaking your head?

[Henry Washington]

No. No. The problem with a fixer upper home for an end user or someone moving into it is you still got to put down a hefty down payment. Your rate is still really high right now. So your monthly payment is way higher than you want to afford. And then you have to pay your rent while you're renovating that house a lot of times. And then cost of construction so high is just too many costs. So we've seen the opposite. We've gotten much better buys on the bigger fixers. I'm like, substantially better buys.

[James Dainard]

Well, also, yeah. Depending on how much needs to be fixed, you might not even be able to finance it.

[Henry Washington]

Yeah. And just to control those costs, you know, it's like flippers and value add. Investors can do the renovation a lot of times for percent less than a homeowner.

[Dave Meyer]

Yeah.

[Henry Washington]

And so it doesn't make it more competitive. It just makes it harder for them to do. And honestly, it's like everything's so affordable. People want to deal with the headache. They're like, no, the payment's already my headache.

[Kathy Fecke]

I think people realize it takes too much cash to be able to do this. And if they have that much cash on hand, then they'll just buy something that is already fixed up.

[James Dainard]

I mean, if they follow bigger pockets and they know how to do it, then, yeah, there's a lot of obviously bigger pockets followers who have taken advantage of the opportunity for special financing, but traditional financing, it's going to be really hard.

[Dave Meyer]

If only they read the house flipping framework, Mr. James Dainard. They to do this, build equity in their primary residence. Come on.

[Henry Washington]

You know what I mean? No more excuses. The blueprint there.

[Dave Meyer]

All right, so. So for out of those five, I'm giving Zillow about a 5050 success rate. We did write down three other things that they predicted, but I don't even know how to evaluate them. They were six is more home improvements will be done by homeowners.

[Kathy Fecke]

That's probably true.

[Dave Meyer]

I'm guessing that's probably true, but I don't really know how to measure that.

[James Dainard]

Yeah, that seems true. Because they're staying put.

[Dave Meyer]

Yeah. Seven is home buyers will seek out nostalgic touches and sensory pleasures.

[James Dainard]

I Don't even. I don't even know why that's on there.

[Kathy Fecke]

Is this, like, home asmr? Like what?

[Dave Meyer]

Yeah, I just. It's a weird thing for Zillow to write. I don't like it. And then. Last one is artificial intelligence will enhance home search and financing. I'm just going to give this one to Henry because I know how much Henry loves virtual staging. So, Henry, what do you think of this one?

[Kathy Fecke]

I think virtual staging is the worst thing in the history of real estate, but I don't know, man. I don't think it's that big of an influence in. Definitely not in financing, but in home search. No, I don't even see that. No.

[Dave Meyer]

I'm all in on AI, but, like, what do you. Zillow makes it easy enough. You just click around. What do you need AI for? Henry?

[Henry Washington]

Is virtual staging worse than the homeowner? That's just guessing on staging, though.

[Kathy Fecke]

Yes. Yes, it is.

[Henry Washington]

I don't know.

[Kathy Fecke]

Don't set me up to think this place is amazing and then I walk in and it smells dingy and there's nothing in there. It's. It's the worst. It's. It's the worst.

[Dave Meyer]

All right, so we've now graded Zillow's predictions, but how did we do? We'll take a freak look back at the calls we made in 2024 and find who got away with not making any predictions at all right after the break. Want to invest in real estate, but.

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[Dave Meyer]

Hey friends, welcome back to on the Market. All right, well Zillow did okay. 5050 for you know, it's just as good as the husky. Like Henry said, let's see how we all did last year around this time. We made predictions on home prices, interest rates and just some questions about what the best markets were going to be and the best opportunities for investors. And fun fact, last year when we did this was the day your granddaughter Mia was born. Kathy, congratulations. Was that a full year ago? Has she turned one yet?

[James Dainard]

She just turned one November 8th. And you know, when, when she was smashing the cake in her face, she kind of let me know that she'd like me to buy her a house now so that she can have something when she's 30.

[Dave Meyer]

And are you going to oblige her?

[James Dainard]

No. Maybe. Maybe.

[Dave Meyer]

Okay, fair enough. All right, well, let's. Home prices last year, each of us gave a prediction, and I am looking them up. Last year, Kathy, you said prices would be up 4% year over year. Henry, you gave a range, very political, 3 to 4%. So right on the heels of Kathy, James, you said 2% decline. But when our producer Jennifer looked it up, you said flat, maybe 2% decline. So I'm going to give you that range there. And I said 1 to 2% year over year. So, Kathy, congratulations. You were exactly right. I looked this up on Redfin, which is what I use a lot of the data for on the show, and it is as of the last month, we have data for. So this is back in September. It was 4% year over year. So, Kathy, you nailed this one. I can't believe that, you know, the.

[James Dainard]

Crystal ball is working. Rich bought me one last year and I don't know, maybe I'm learning how to use it finally.

[Dave Meyer]

Congrats. And Henry, if you just, you know, if you had some conviction, man, and just, you know, said one or the other, you would have been right. But you gave a range. You were technically also right, but a little less right than Kathy.

[Kathy Fecke]

I'll take it.

[Dave Meyer]

Well, congratulations. So just for everyone's education, we have seen home prices start to decline. The growth rate, excuse me, prices aren't declining, but earlier in the year, they were up six, five and a half percent. They're starting to slow down to about 4%. My expectation is they'll. They'll slow down a little bit more. But we'll see in our predictions before James, you were the only one who predicted a decline. And as you said, you were a little bit off on that one. Better luck next year, man.

[Henry Washington]

You know, I had no problem with my prediction because it made me very conservative with my underwriting. And part of it, I'm conservative because I'm a flipper. So it's a little higher risk. But the benefit is I thought it could be a 2% decline. And Seattle was up 8% so we saw 10% over our underwriting. So.

[Dave Meyer]

Oh, there you go.

[Henry Washington]

It was a good year. It was a great year.

[Dave Meyer]

That's a good year for you. Okay, so the second thing we predicted was recessions, whether we would technically be in a recession or not. Kathy, you said end of Q2 or Q3, we'd be in a recession. Henry, you said we'll technically be in a recession, but no one will act like it. James, my notes here from Jennifer says recession. James didn't really answer, but he's worried about credit card debt. We're just going to count you wrong on that one. And I think I got this one right. I said we'll see GDP slow down, but we won't be in a recession. And according to all the data, that's what we've got. We've seen GDP grow this year. It's estimated at 2.5% as of November 7th. So no official recession. And by most accounts, people believe that we are heading towards that soft landing that the, that the Fed was predicting. Kathy, you nailed the first one. You're a little off on this one. Any reflections on what you missed here?

[James Dainard]

Yeah, I think I was 50% right, because I would say 50% of the country really feels like they're in a recession, and 50%, they're buying second and third homes. So it is the tale of two worlds in this country, and I don't think that's going to change anytime soon. But if you went around and asked people, I swear to you, 50% would say, we are absolutely in a recession.

[Dave Meyer]

So maybe Henry was right. Well, he said technically in a recession, no one will act like it. But I think the answer but Kathy's saying is not technically in a recession, but people will act like it. Sort of the inverse, what you were saying there, Henry. But I do think we still see people spending, despite what Kathy's sending, too. So some of that sentiment is correct. All right, so moving on to our third prediction, which was about interest rates and where mortgage rates would be right now. Kathy, you said six and a half percent. Henry, you said 6.75%. James, you said 7% and I said 7.1%. James, you're finally getting on the board, man. I think you and I here split this one. When I looked it up this morning, it was 7.05. So it was right between the two of us, but both of us being most bearish on this one, thinking mortgage rates wouldn't come down. And I think, unfortunately for everyone listening to us, we were more correct about that.

[James Dainard]

Yeah, but if we did this show three weeks ago, guys.

[Dave Meyer]

But if we did it eight months ago, we'd be totally wrong. Yes, they did come down briefly in September, but unfortunately, mortgage rates have not come down as much as people thought. And I am looking forward to the conversation about where we think mortgage rates are going. First. Let's just wrap up. Our last prediction right now, which we made, was which markets were going to be the most popular or the best places to invest. Kathy, you said the Southeast. Henry, big surprise. You said northwest Arkansas, but then you also said bigger cities that are unsexy, like Cleveland and Indianapolis. James, you said affordable single family homes. Man, we got to hold James feet to the fire this year. He didn't answer any questions.

[Henry Washington]

Affordable single family homes did do well.

[Dave Meyer]

That's true. And you know, unsurprisingly, I said markets in the Midwest, so I think Midwest did great. I was pretty happy with that. Kathy, how would you review your prediction about the Southeast?

[James Dainard]

Well, with the data I do not have in front of me, I would say that it did pretty well.

[Dave Meyer]

Actually. We could talk about this in a little bit, but I was writing my I do this state of real estate investing report for the bigger pockets every year, and I was writing it today, and I think that the differentiation now has become like, Gulf states and other parts of the Southeast, because like Louisiana, Alabama, parts of Florida that are on the Gulf are not doing particularly great. But the rest of the Southeast, the Carolinas, Tennessee, you know, a lot of Georgia, as Henry would tell you in Arkansas, like, are still doing well. So I think calling it the Southeast is no longer as accurate, but there's definitely parts that have done extremely well. All right. Well, I think overall, other than James, who didn't say anything, we did pretty well last year. And so congratulations. This was a. I mean, we started the show and started making predictions about the housing market during probably the three toughest years to make predictions about the housing market. And I think this is the best we've ever done.

[Kathy Fecke]

It's definitely the best we've ever done.

[James Dainard]

Yeah. I just want to say, though, that even though James maybe didn't nail this, he probably made the most money last year.

[Dave Meyer]

Oh, for sure. That's. That's not even a question. Good year.

[Henry Washington]

It was a good year.

[Dave Meyer]

Yeah. Yes. Okay. James is. I mean, James has a house on the market in Newport Beach. That's like his profit's going to be more than my net worth on that one house.

[Henry Washington]

Yeah. Hopefully I get some lift there, too. Because the thing is, on market ready to go. It's a different beast listing that expensive a house, I'll tell you that much.

[Dave Meyer]

Do your all yourselves a favor and go look on James Instagram and check out the house he's flipping in Newport Beach, California. It's like, like the most beautiful house I've seen. It's really cool. All right, time for one last quick break. But when we come back, we're all back in the prediction hot seat. Stick with us. Do you want to invest in cash flowing rentals but don't have the time to manage the properties?

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[Dave Meyer]

Welcome back to the show. All right, well enough. Enough reminiscing about our good and bad predictions from last year. Let's talk about what we think is going to happen in the next year. Before I ask for reasons I just want a quick Housing prices up or down next year. Henry, your first up. James up. Kathy up 4% I'm with you. Up. Okay Kathy, already you're sticking with 4%, which is funny because I think the first time we ever did this, Kathy, you just said 7% for everything. Like two out of three of them.

[James Dainard]

Four is my new number.

[Dave Meyer]

All right, so Kathy, saying 4%, Henry or James. Let's just start with you, Henry. Do you have any more specific predictions about what you think we'll see home prices do on a national basis this coming year?

[Kathy Fecke]

Yeah, I think I'll go a little below kathy and say 3%.

[Dave Meyer]

Okay. James.

[Henry Washington]

2.5.

[Dave Meyer]

All right, a little bit slower. I'm going to split the difference and do 3.5%. So we're all. All tightly clustered here. But just calling out that most of us think that home price appreciation will probably be roughly in the range of inflation next year. Like, not growing much more than that. So just something to call out, but I also want to call out that this is normal. Like, somewhere between 2 and 4% is normal. So it's interesting that all of us are thinking that we'll have a relatively normal housing market next year. I don't know if we've ever really predicted that before.

[James Dainard]

I wouldn't say normal, but it's just, if you just look at supply and demand still, it's. It's an issue. Even though inventory has risen quite a lot, it's still way below where it has been at a time when you have, again, the huge population of millennials. So even though most people can't afford to buy a home, you don't need that many who can. You know, if 4 to 5 million homes are trading hands every year and you have how many millennials?

[Dave Meyer]

What is this?

[James Dainard]

78 million? I don't know. It's a lot. A lot of us, you know, so you don't need that many people who can do it. And that's why I just keep predicting in this scenario, there's only one way it can go. Even even if there's deregulation, even if there's stimulus to the housing market, you just can't build that much supply in one year, you know?

[Dave Meyer]

Yeah, I think that the. The normal part is the appreciation level. But I. My guess, and we're not going to predict this today, is that home sales volume is going to remain relatively slow. And just for everyone's reference and context, a normal year in the housing market over the last 25 years has been about 5.5 million sales. This year, we're on pace for less than 4 million. So it's super slow. Even though we're seeing prices go up, it's very, very slow. And it feels even slower because during the pandemic, it actually went up to over 6 million. So it's less than 50% of where we were at the peak in 2021. And so that's. If you're feeling like the market is really sluggish, you're right. It has really dramatically changed in terms of the total sales volume. And personally, I think it will get a little bit better this coming year. But I don't think we're getting back necessarily to a normal year in terms of sales volume where we have five and a half million, hopefully we'll have four and a half or five million would be an amazing comeback and hopefully we'll get closer to that because, you know, it's one thing for investors, but obviously there are a lot of people who listen to the show who are real estate agents or loan officers. And, you know, a lot of the American economy relies on real estate transactions. And so hopefully we'll see that start to take off again this coming year. All right, now for the worst part of the show where we all predict mortgage rates. And I spent a lot of time looking at bond yield forecasts this morning, so watch out. That means I'll probably be the most wrong because I spent the most time thinking about it. James, I'm going to put you on the hotspot first here. What do you think the average rate on a 30 year fixed rate mortgage will be one year from now, the middle of November 2025?

[Henry Washington]

You know, I'm predicting we're going to be at 5.95.

[Dave Meyer]

Whoa.

[James Dainard]

Wow.

[Dave Meyer]

That's so close to what I was going to predict.

[Henry Washington]

Locked into my brain. It's been there for months. I don't know why. I think we're going to be high fives going into next year.

[James Dainard]

Amazing.

[Dave Meyer]

I will give you a high five. If we're in the high fives, I will be very excited.

[Constant Contact]

Well, how could you say that if.

[Kathy Fecke]

You didn't think home values are going to increase by more than 4%?

[Henry Washington]

Well, I think part of the reason is we're going to see some issues going on in the economy otherwise, and that's why rates are going to be coming down. You know, I think, you know, it's, I feel like we've been kind of on the slow skid. We'll see what happens. But, you know, I think there could be a jolt and then there could be some, some, you know, little decline on the backside.

[Dave Meyer]

Okay. All right, I like it. Kathy, what's your prediction?

[James Dainard]

Well, to James point, there are astrologers saying that there is Going to be a crash. But those are YouTube experts, right? No, I'm going to say six and a half percent, because I actually think it's going to be pretty robust economy.

[Dave Meyer]

Okay, all right. Staying pretty high. Henry, what do you got?

[Kathy Fecke]

Six and a quarter.

[Dave Meyer]

Damn it, Henry, stop it. That was what I was going to say.

[James Dainard]

Okay, all right.

[Dave Meyer]

I'm going to say 6.12.

[Henry Washington]

Okay.

[Kathy Fecke]

Okay.

[Dave Meyer]

Precisely. 6.12 is exactly what it's going to be.

[James Dainard]

I'm so shocked, Dave. I thought for sure you'd think there'd be inflation this coming year.

[Dave Meyer]

So I do think there are some risks of inflation coming, but I think it might take a little while for that to reignite again is my guess. First and foremost, the reason I think a lot of people are thinking there might be inflation in the coming year is if there are tariffs implemented. My guess is that if that happens at all, it will not be this across the board tariff like we've been talking about, and it will probably take a while for them to actually get implemented. There's some historical precedent. Like when Trump said he was going to implement tariffs on China in his first campaign, he did it, but it wasn't till 2018. It took two years of, like, negotiating and figuring out the plan. And so maybe I'll move faster this time. I don't know, but I think it will. It might take a little while, and I think this spread between bond yields and mortgage rates will compress a little bit. And so I still think we're not going to be into the fives, but I, I think they'll come down a little bit. Not in the beginning of next year, but by the end of next year. My hope is we'll be in the low sixes. All right, now for our next prediction, what else do we have to predict here? Okay, markets. What markets do you like for 2025? Kathy, you've always got some good ideas here. What do you got?

[James Dainard]

Well, it comes from Price, WaterhouseCooper and the Urban Land Institute, who has named no shocker guys, Dallas, Fort Worth in the top 10 list for six years, but it just dethroned Phoenix and Nashville and moved to the top for 2025. So, okay, I'm sticking with my, you know, Dallas, Fort Worth and then not. Not shocking either. Tampa, St. Petersburg is also on that list. So those have been our markets. Continue to be our market.

[Dave Meyer]

Sticking with it. Nothing fancy. I like it. It. James, are you just. You got anything other than Seattle?

[Henry Washington]

Well, I love, I love Seattle and now I'm going to start ripping up Arizona. So I like that market, too.

[Dave Meyer]

Nice.

[Henry Washington]

Even though people may think it's bubbly, there's always opportunity in every bubble. I mean, that's the thing. There's always an opportunity in every market. But if, you know, if I was going to look at buying rentals outside the state or just buying elsewhere, you know, I really do, like, affordable, like anything that is a more affordable, quality place to live. You know, like places like Huntsville, Alabama, Little Rock, Arkansas, on the top of the list. So, you know, I'm going to chase more the metrics of medium income versus affordability. I just think that those have the best Runway because everything's still going to be really expensive in 2025, and people want that relief.

[Dave Meyer]

Well, maybe you can join. I got to talk to my business partner, Henry about our investments in the lake effect cash flow region.

[Kathy Fecke]

That's right.

[Dave Meyer]

Three studs under a window doesn't have the same ring to it. But if you want to start buying some affordable stuff, James, you know who.

[Henry Washington]

To call more studs than Merrily barrier. Right. You know, Dave, we could do this. It could be a swap. You know, we're doing some flip stuff together. I'll give you some money for passive markets. I'll give it to you.

[Dave Meyer]

Let's do it.

[Henry Washington]

And we'll. We'll do a cash swap.

[Kathy Fecke]

Yeah. So James can be our lender for our lake effect cash flow house.

[Dave Meyer]

You have to come. Half the fun is we just want to go on a road trip through the midwest and hang out.

[Henry Washington]

Are we getting a huge RV if you're coming?

[Dave Meyer]

Yes, obviously. Okay.

[Henry Washington]

Yeah, I'm in for that.

[Dave Meyer]

Kathy, you in?

[James Dainard]

Yeah. I feel like it's two studs in the money, you know.

[Dave Meyer]

This will be great. All right. Road trip this summer. Okay. Henry. I know. Well, I kind of gave away your plan, or maybe you're going to say something else. What markets do you like this coming year?

[Kathy Fecke]

Well, I do like the lake effect cash flow area for cash flow. But for the guys of this question, the markets that I think will do the best are going to be major metros. It's kind of those tertiary major metros. So not the Dallas, Fort Worth or the. Or the, you know, Seattle. We're talking places like Cleveland, Ohio, Birmingham, Alabama, Kansas City, Missouri, Pittsburgh, Pennsylvania, Indianapolis, Indiana. So these places are all kind of that Midwest, tertiary big city where. Where you get affordability, but you also get appreciation.

[Dave Meyer]

Okay, I like it. Well, I'm gonna make a couple specific things. I. I do really think the. The Southeast is going to keep rocking. I really like the Carolinas, personally. I think if you look at north and South Carolina, there's a lot of good stuff going on there in the. In the Midwest. I think Madison, Wisconsin is a really interesting market and I've always avoided this place. But Detroit is starting to grow.

[Kathy Fecke]

Detroit's on my list too.

[Dave Meyer]

And Detroit is, you know, I don't know if I'd invest there myself because you have to know what you're doing in a city like that. But there is a lot of growth there. And then my bold prediction, this is not, you know, fueled by data. This is just a gut instinct. I think suburbs outside major metros that have declined in the last few years are going to grow. So I think outside New York City, I think outside San Francisco, I think outside, probably in your area, James, not that they've declined, but I think suburbs of major economic hubs are going to grow. People are. A lot of people are getting called back to the office. I think we're going to start to see those downtown areas pick up again, and the wealthy areas that surround them are probably going to grow. I'm not investing there. I don't know if those are more flipping opportunities, which I don't do, but if you're a flipper, I would look at those places.

[James Dainard]

Yeah, I mean, you make a great point. A lot changed with the election. And even here in la, in the where we were just kind of allowing people to rob and get away with it, we passed something that says you get actually. It's actually a felony to rob. So I feel like in some of these areas where people have left, they might be coming back.

[Henry Washington]

Yeah. Some of these cities are pushing back on crime. Quality living is going to go up in them.

[Dave Meyer]

Yeah.

[Henry Washington]

Because it was just out of control. But, Dave, every time I think of Detroit, if you're looking at it, I remember in 2008, I almost bought my brother a house for Christmas.

[Kathy Fecke]

Buy them for a dollar.

[Henry Washington]

Dude. They were like 200 bucks. You could get a house in Detroit. It was like. And I'm still mad I didn't go buy a swath of them.

[Kathy Fecke]

You can get it from the land bank for a dollar.

[James Dainard]

No, you could get them for free.

[Dave Meyer]

Yeah, you still can. Like, they're paying in certain areas to knock them down, so they'll give them to you for free. But that's what I mean. You really need to know what you're doing because there are certain areas that are. Are really exciting in Detroit. If you read about it. Like, there's some really cool investment. There's businesses going in there, there's jobs there, and if you're in the right area, it could be profitable. But there are also some areas that have really been hit hard economically and I don't know enough about it personally to know which. Which one's which.

[James Dainard]

Oh, we were really active in Detroit with our single family rental fund. We bought in the Southeast but then also offset for cash flow in Detroit. And I think I told you guys, those homes were so old, there was so much maintenance, even though they were in good areas. At the end of the day, when we sold all the properties, our properties in the Southeast had about a 28% IRR, whereas the Detroit had about 6 to 8% because just all the expenses just ate up the profits. But you know, again, if you go into it knowing that and get the right price, then it's not for James.

[Dave Meyer]

I mean, better than Nothing. But yeah, 6% IRR is not while you're in the business. Yeah, it's not worth the effort for that for sure. All right, well, we're all on record. Anyone else want to make just a fun prediction? Got anything else? 2025, anything you're looking forward to? Real estate, not real estate.

[James Dainard]

I mean I've just seen again, I'm not giving an opinion on this, just what I've seen from people I've talked to. A lot of money was made in the last couple of days. Like I talked to someone who said I just made $60,000 last week. So where does that money tend to go go? And it does often go to real estate. So I do believe that the there will be an uptick in, in purchases.

[Kathy Fecke]

Bitcoin's at an all time high. I think there's going to be several bitcoin million and billionaires.

[Dave Meyer]

Yeah, it went up to like 90,000.

[James Dainard]

Yeah.

[Dave Meyer]

So glad I own one fraction of one bitcoin.

[Henry Washington]

I'm so glad I shut down my bitcoin farm in 2018. What a that that was a miss of all this. We had a meat locker stack full of machines. We're actually one of the only people to put a bitcoin farm up for sale. Should have kept that one.

[Dave Meyer]

Well, one thing I maybe it's not a prediction, it's more of a inquiry about 2025 is we have talked about actually doing some live events for on the market and I would love to know if all of our listeners would be interested in that and if you're interested in it, what would you want it to look like? Is it a meet and greet hanging out? Do you want us to do economic conversation? Local market data? Hit any of us up on Instagram or on Biggerpockets and let us know what you would want to see if we did some sort of live events in 2025. In addition to that, go buy James's book right now. Go to biggerpockets.com house flipping yt. That's house flipping. And then the letters Y and t. Like YouTube. Even though if you might be listening to this on the podcast, it's house flipping yt. Go buy his book right now. It's going to be amazing. Thank you three so much for joining us and for being so brave to make these bold predictions as you have. Thanks again for listening. We'll see you next time for on the Market. Thank you all for listening to the Biggerpockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, Content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com.

[Fundrise]

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember past performance is not indicative of future results. Bigger Pocket Pockets, LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.