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

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.

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.

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.

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.