Real Estate Rookie Podcast – Episode Summary: "Everything You Need to Know About the 2025 Housing Market"

Release Date: January 22, 2025
Hosts: Ashley Kehr and Tony J. Robinson
Guest: Dave Meyer

Introduction

In this episode of the Real Estate Rookie podcast, hosts Ashley Kehr and Tony J. Robinson welcome Dave Meyer from the Maine BiggerPockets Real Estate Podcast. Dave shares his comprehensive market report on the 2025 housing landscape, offering invaluable insights for rookie investors aiming to navigate the evolving real estate market.

Housing Affordability Outlook

Dave Meyer opens the discussion by addressing the critical issue of housing affordability in 2025. He presents a rather cautious outlook, emphasizing that significant improvements in affordability are unlikely in the near future.

Ashley Kehr [01:15]: "Dave, in your market report, you assert that you simply don't see a clear path to the affordability levels to recover anytime soon. Soon. Direct quote."

Dave Meyer [01:37]: "I don't see how we get better housing affordability in the US in any significant way."

Dave breaks down the three pillars of housing affordability:

1. Housing Prices: Expectation of housing prices remaining relatively flat with no major corrections or crashes.
2. Mortgage Rates: Contrary to widespread hopes, mortgage rates continue to climb, defying predictions of a downward trend in the near term.
3. Wages: While wages are increasing, the growth is gradual and may not sufficiently enhance affordability within the short term.

Despite these challenges, Dave remains optimistic about the overall real estate market's potential.

Investing Strategies for Rookies in 2025

Addressing concerns about the current market conditions, Dave reassures rookie investors that real estate remains a viable and lucrative investment avenue.

Dave Meyer [03:23]: "No, not at all. I think that quite the opposite... I'm very excited and bullish about real estate in general."

He emphasizes the importance of adjusting expectations and strategies to align with the current market dynamics. Rather than seeking immediate, high cash flow returns, Dave advocates for a long-term perspective, targeting investments that offer stability and potential appreciation over time.

Dave Meyer [15:46]: "My personal goal is to try, and I call it like a 10% rule, I want to get my total return in that first year near 10%."

Market Selection and Growth Indicators

Choosing the right market is pivotal for successful real estate investing. Dave outlines key factors to consider:

1. Job Growth: Markets with robust job creation tend to drive demand for housing, pushing up property values.
2. Population Growth: Increasing population correlates with higher demand for both rental and owned properties.
3. Affordability: Identifying markets where housing remains affordable relative to income levels can offer substantial long-term gains.

Dave Meyer [19:33]: "Buffalo is a perfect example of that. In that Zillow article they said that there are two new jobs for every home that's being built in Buffalo. That's like Econ 101. There's going to be demand for housing and they're not building enough of it. That's going to push up prices."

Dave highlights Buffalo as a standout market, lauding its affordability and strong job growth, making it an attractive option for both long-term and short-term rental investments.

Short-term vs. Long-term Rentals

The podcast delves into the nuances of short-term versus long-term rental strategies.

• Short-term Rentals: Tony observes a saturation in major markets, leading to diminished revenues due to excessive competition. The sweet spot lies in mid-sized destinations where competition is manageable.

  Tony J. Robinson [21:08]: "We're seeing revenues get pinched in some of the markets that are just massive... where there's more opportunity are some of those mid-size Airbnb destinations."

• Long-term Rentals: Dave points to the growing demand in suburban areas, where renters tend to stay longer, reducing vacancy rates and ensuring stable income streams.

  Dave Meyer [27:43]: "Suburban areas are growing a lot faster and are more in demand for both rentals and home prices."

Identifying Hidden Value in Properties

For rookie investors, uncovering hidden value can lead to significant returns. Dave advises looking beyond surface metrics:

1. Understand Market Dynamics: Analyze economic indicators like job and population growth.
2. Consult Experts: Engage with property managers to gauge realistic rent growth projections.
3. Assess Supply Pipelines: Monitor construction permits and new builds to evaluate future competition.

Dave Meyer [16:23]: "They are a little bit hidden. If just go and look at Zillow and are like looking at the price and the estimated rent, you're probably going to find yourself in a position saying what I hear a lot of people say right now, which is that there are no deals."

Utilizing BiggerPockets' resources, including insights from analysts like Austin Wolf, can enhance market analysis and decision-making processes.

New Construction vs. Existing Properties

Dave explores the current opportunities in new construction, which presents a unique advantage due to builder incentives amidst high profits.

Dave Meyer [40:02]: "Builders are making huge profits... they're willing to eat a little bit of that massive profit to incentivize people to buy."

Advantages of New Construction:

• Lower Maintenance Costs: Brand new properties require minimal capital expenditures in the short to medium term.
• Builder Incentives: Rate buy-downs, price concessions, and other incentives make new builds financially attractive.
• Inventory Availability: Builders continue to produce high-quality homes in desirable locations, addressing the scarcity of existing homes.

Risks:

• Market Saturation in Certain Areas: Not all markets have a healthy demand for new constructions.
• Location Quality: The appeal of new developments depends heavily on their location and surrounding infrastructure.

Dave Meyer [43:34]: "It's going to be, you know, landlording with Training wheels, because you're not going to have a lot of the maintenance issues that I think you get."

Economic Uncertainties and Policy Impacts

Dave addresses the uncertainties stemming from potential policy changes under the new administration, which could influence the housing market through tariffs, tax breaks, and other economic policies.

Dave Meyer [46:35]: "I expect things to change and we're going to have to see what that means for investors over the, you know, probably in the first half of 2025."

He underscores the importance of patience and adaptability, advising investors to stay informed about policy developments and their implications on the real estate sector.

Conclusion

The episode concludes with Dave Meyer encouraging rookie investors to leverage available resources, build strong teams, and maintain flexibility in their investment strategies. Emphasizing that there is no one-size-fits-all approach, Dave and the hosts advocate for personalized strategies tailored to individual goals and market conditions.

Dave Meyer [33:18]: "Like the most successful real estate investor I know is James Danard and he only invests here, right? So like people can clearly make it work. It just depends on like what your skill set is and what you're trying to accomplish."

Ashley and Tony reiterate the importance of continuous learning and engagement with the BiggerPockets community to stay ahead in the dynamic real estate landscape of 2025.

Stay Tuned:
For more insights and strategies, join Dave Meyer and the hosts at the upcoming Momentum Virtual Summit, running from February 11th to April 1st. Engage in live Q&A sessions and connect with real estate experts to further enhance your investment journey.

Visit biggerpockets.com/summit25 for more information.

This summary aims to provide a comprehensive overview of the podcast episode, capturing the essence of the discussions and key takeaways for aspiring real estate investors.