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Tax Smart Real Estate Investors Podcast
310. 2025 Real Estate Market Outlook with Dave Meyer from BiggerPockets
00:43:15
In this episode of the TaxSmart REI Podcast, Thom…
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Host 1 (Tax Smart REI Podcast Host)
You're now listening to the Tax Smart REI Podcast, the number one tax podcast.
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Host 2 (Tax Smart REI Podcast Co-Host)
For real estate investors.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Your source for.
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Host 1 Closing Remarks
All things real estate accounting and tax. Here we reveal our secrets that can save you thousands in taxes, streamline your accounting process, and help grow your business. Stay tuned to hear insightful interviews with industry experts, successful real estate investors, and current clients on what strategies they use to grow their business and how they steer clear of Uncle Sam.
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Host 1 (Tax Smart REI Podcast Host)
Hey, thanks for tuning in to this.
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Host 2 (Tax Smart REI Podcast Co-Host)
Week'S episode of the Tax Smart REI Podcast. Today we're joined with Dave Myers from Biggerpockets to discuss the 2025 market outlook. We'll be talking about residential, commercial, bonus, depreciation, all that good stuff, everything everybody wants to know. So we'll be diving into all of that in just one minute.
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Host 1 (Tax Smart REI Podcast Host)
Hey, Tax Smart investors. As you may have heard, the IRS received additional funding from the Inflation Reduction act, and they've been using it to ramp up enforcement efforts. And we've been receiving more requests from investors looking for audit support than ever before. That's why we created the IRS Audit Checklist, which is designed to help you stay compliant in the event of an IRS audit. You can access the Checklist by visiting ww.therealestatecpa.com IRS checklist. Again, you could grab the IRS Audit checklist by visiting ww.therealestatecpa.com IRS checklist. That's it for now. We'll dive right into today's episode.
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Host 2 (Tax Smart REI Podcast Co-Host)
All right, and we're back. So, Dave, I know you joined us last year for the 2024 market outlook, but just for anybody who might be tuning in or new to the real estate game might not know much about your background, would you be able to just kind of give our listeners a quick overview of your background and what your role is at biggerpockets?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Sure, yeah. My name is Dave Meyer. I am the head of real estate investing at Biggerpockets, which is a community of more than 3 million real estate investors in the United States. And our goal at Bigger Pockets is to help ordinary Americans achieve financial freedom through real estate invest. And myself, I've been an investor for just about 15 years now, and I've been at BiggerPockets as an analyst and now as a podcast host and head of real estate investing for about nine years.
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Host 2 (Tax Smart REI Podcast Co-Host)
That's awesome. Biggerpockets, a big help for a lot of people getting into real estate. So if you're listening, you haven't checked it out. You're missing out. Before we break right into the crystal ball, of kind of where we are, of where maybe we're heading. Where are we in the current market cycle? And you know, I guess how did we get here?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah, we're in a very weird, drawn out market cycle, in my opinion. And I think we're slowly, slowly reaching the bottom. Just to give you the tldr, I don't think that means we're about to hit some very rapid recovery, but I do think we've seen the worst of it, both in terms of mortgage rates and probably transaction volume, which has hit about a 40 year low, I think. And so we're at a very low number of home sales. I have a hard time seeing it get much worse than it is right now. So that's the bad news. The good news is it probably gets better from here, albeit pretty slowly. I'm happy to dive into why I think that, but that's kind of my headline here for the market cycle.
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Host 2 (Tax Smart REI Podcast Co-Host)
You know, that makes a lot of sense. I know things have been a little, a little rocky since interest rates started shooting up after the COVID pandemic. Could we drill down and sell a little bit into how you think things are going to play out from here?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah, yeah, of course. So I think it helps to give a little bit of historical context that basically over the last couple of years during COVID we saw this just massive run up in home sales prices, but also in home sales volume. So they skyrocketed to about 6 million home sales per year. Normal is about 5.25 million. So we were really cooking and things were looking really good and everything was great for the entire industry. And then the last couple of years, the pendulum has swung back in the other direction in pretty dramatic fashion. So we've seen a 50% decline in transaction volume. Meanwhile, prices have stayed pretty resilient despite the industry just feeling really sluggish and slow. And this is sort of, I won't bore you all with just economics, but it's sort of Econ 101. But basically what happened in 2023 is that affordability declined. You know, we saw this because prices remained high, mortgage rates skyrocketed, and that brought down both supply and demand at the same time. That's sort of the key thing that's happened over the last couple of years is intuitively when things get more expensive, demand least, people don't want to buy as many homes and so that reduces that side. But the unique part of the housing market is that roughly 75, 80% of people who sell their home also go on to Buy. And so it creates this adverse conditions for selling. And so when you see demand and supply drop, you see prices could stay stable, but volume is going to go down. So that's sort of where we are at today. The thing is that the suppressed sales volume, in my opinion at least can only last so long, because homes are certainly investments. They're big financial decisions, but they're also functional. It's not like a stock or cryptocurrency where this is pure investment trying to make money. And that other element of owning real estate. For 80% of homes that are owned by ordinary Americans who live in them, things just happen. People get new jobs, they have kids, they want to move. All this stuff happens. And so I do believe that we're starting to see the impact of that. People can only kick the can down the road so much. And so we're starting to see more people list their homes for sale. That should increase sales volume, albeit slowly, and that should hopefully get us in a better position. But I'm not talking about even not maybe not even 10% increase this year. I think it's going to be maybe a 5% increase in home sales this year and we'll see a little bit more the following year and the year after that. And that's sort of what we're going to be in for, is sort of a long, slow recovery.
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Host 3 (Additional Host or Contributor)
Do you see anything specifically that you see being a catalyst for maybe even something that might surpass that 5 or 10% increase in volume?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
To me, it all comes down to affordability. Like my whole thesis about the housing market is affordability, and that we need for both sellers and buyers homes to get more affordable, right? And affordability, obviously everyone's heard that word, but in the housing market, as sort of this very kind of specific definition, which is how easily the average American can afford the average priced home. And within that, there are three primary sort of levers or three legs to this stool. What is home prices? How much costs? One is interest rates, because most people who buy a new home are using debt and a lot of it. And so borrowing costs really matter. And then third is real wages, which is just how much are your wages going up above the pace of inflation? And if you look at those three things, I have a hard time seeing that any of them are going to help affordability get that much better. In short order, wages are going up. That's sort of the bright spot here, is that wages are going up above the pace of inflation. And I personally think that's going to continue at Least for the next year or so. It's hard to predict beyond that. So that will make affordability a little bit better. And that's one of the main reasons affordability in 2024 actually stayed stagnant. It's not great. But it did get worse, which I think we'll all take at this point. So that's one thing. Home prices, I think they're going to be kind of flat over the next year relative to inflation and so not going to get worse in terms of affordability, but probably not getting better. Certain markets will see decline, some will do better, but on a national basis. I'm not someone who's ever really predicted a crash in this cycle and I don't really see why it would happen right now. Could happen, but I think it's lower probability. And so really the whole thing hinges on mortgage rates. This is a very long winded way of saying, is that, is there a catalyst? It's going to be mortgage rates. I think I buck the trend with most people in this industry. I don't think rates are going down that much. I don't think they're going past, you know, maybe they'll get to six and a half. That's kind of my forecast for the end of 2025 is maybe at six and a half, maybe the upsides to 6.25. I don't think they're getting into fives. I know some people think that I'm just a little more pessimistic about that. And so I think it would take, you know, maybe six, six and a quarter to really start to get a little bit above that 5, 10%. We got into the fives. If I'm wrong, which happens all the time, then I think we would really start to see that catalyst. But I'm just skeptical that that happens in 2025.
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Host 2 (Tax Smart REI Podcast Co-Host)
Yeah, interest rates have been a bit stubborn. It's definitely a lot of reason why we've seen slowdown or at least why people said that they've slowed down on some acquisitions. Since we're kind of in the residential housing market right now, we're discussing the residential housing market for investors who are maybe currently in the game already. What tactics do you see them using to stay ahead at this point?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah, I, I think that we are sort of entering this new era of residential investing. Whereas the last, you know, prior to 2022, I'd say like 2013 to 2022 is sort of what I call the Goldilocks era. It's like everything went right, right. You know, we had a lot of demand, we had a shortage of housing supply. We had a previous price crash that created this once in a lifetime rent to price ratio where you could really generate solid cash flow. And it was great. It was super easy to be an investor and it was a lot of fun. And I think we're not going back to it. I know that's not what everyone wants to hear, but I just don't see a scenario where we go back to that and that's fine. Real estate, it was a great business out before that. It was a great business in the 90s, in the 80s, it was a great business in the 1880s. This is one of the oldest businesses ever and it's been successful for a long time. And I think that first and foremost, before we get into strategy and tactics, the biggest thing that people need to do is shift their expectations. Real estate investing is still great, but it's a long term game. It's really always been a long term game. And if you're in it for two or three years, you should probably invest in something else. That's my honest opinion. If you want to build real wealth over the long term, real estate still the place to be. And so I just think people need to take a hard look and think, you know, are you trying to get rich quick? Are you trying to retire two, three, four, five years? It's probably not happening. And frankly, even during this Goldilocks era, it probably wasn't happening then. Despite what people on social media say, that's number one thing. The second thing is to just be patient and to look for deals that are going to work over the long run. I've sort of been developing this framework that I call sort of upside investing, because the reality is that most deals you look at today are going to be fine. They're going to be break even cash flow, they're going to probably at least match the performance of the stock market, which for me is sort of like my baseline. I need to at least get an 8, 9, 10% annualized ROI to make this worth my time. But I think there's a lot of reason to believe that real estate will do really well in a 2, 3, 5, 7 year timeline. And so I'm just trying to find really good assets in, in strong markets that I can generate upside for over that hold period. And we can get into the tactics of that. But that's sort of the framework that I'm personally using in my investing that I recommend people use as well.
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Host 3 (Additional Host or Contributor)
Maybe just a clarification for Our listeners, are you primarily thinking long term rentals? Are you thinking midterm, short term and long term as you make those comments? Or is it, yeah, just maybe some specificity there as you talk about that.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
I'm primarily a long term investor. I own one short term rental and I don't have any midterm rentals. So take this with a grain of salt, but I am an analyst and I spend my time analyzing real estate and investing strategies. And I would say that, no, I don't. I'm not an expert in them, but I also analyze them enough and there's a reason why I don't invest in them. Not because they're bad businesses, but for me personally, I just don't have the time to invest in midterm and short term rentals to make them make sense for me and I would have to pay a property manager a boatload of money to do that. And so I just don't do it. But I think generally speaking it's true for all of them that deals aren't as obvious as they once were. You know, in 2016 you could go on Zillow and calculate the cash flow and at worst it was going to be like a 3 or 4% cash flow and there was upside to probably 12% cash flow and everything was easy. I just don't think that's true in short term rentals, midterm rentals or long term rentals right now. And I know that sort of like sounds super pessimistic, but I'm still buying. I've made offers this year. I bought a bunch of properties last year. Knowing this, like, I just still think it's the best asset class. I don't see where else you put your money that responsibly right now in today's day and age. And if I did, I wouldn't invest in real estate. Like I, I talk about it all day, but I just think that despite the challenges, it's still the best asset class for my personal goals. And I think that's true across all residential. Commercial is a whole other story, but I think it's true across residential.
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Host 2 (Tax Smart REI Podcast Co-Host)
That's great advice, but you know, for short term rentals out there, if you want to delegate, that's like 30% to the property manager. It's crazy how much you have to pay.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Size 35.
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Host 2 (Tax Smart REI Podcast Co-Host)
Yeah, yeah, it's crazy. It's out of control. So if you want it to be a passive business for all the short term rental listeners out there, it's expensive to do that. But Kind of switching gears a little bit into the commercial slash multifamily space. And like, you know, I know it's a different dynamic from residential. What do you see going on in.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
That space right now? So commercial is in what I would say is a crash. I'm surprised that the media doesn't call it this as much because God, they love calling everything a crash. But the one thing that's in an actual crash is not being called that. Except maybe office. People do say the office is crashing because you see 40, 50% declines in certain markets there. Some markets are fine, but it's happening across a lot of subcategories of commercial real estate. I should say that commercial real estate, not one thing. I think there's 16 different subtypes, everything from retail, office, multifamily, industrial, all these things. Personally, like the stuff I study is mostly multi family investing because that's the type of investing I do. I think that's in a crash, it's gone down 15, 20% in some markets more. And I think there's still trouble ahead. But I see a path to good buying conditions in commercial in the next one to two years. Personally, I think that a lot of operators and lenders have kicked the can down the road on debt and restructuring debt and it's got to come up soon. And especially I think a lot of they've had this, I'm sure you guys have heard this phrase survive to 25 is sort of like what a lot of operators have been saying in the space. Well, 25 is not a lot better than 24 or 23. And if I'm right about interest rates, which again I could be wrong, it's not going to get all that much better over the course of this year. And the depth of improvement that most of these operators need to make themselves whole is just not happening. Like we're not getting to a 2% yield on 10 year treasuries, like it's just not happening or 3%. So I just think that we're in this place where there's going to be more distress and there's going to be more opportunities to buy. And so I'm actually, I'm still buying residential, but personally I'm just talking about my own strategy, sort of stacking some cash and keeping some dry powder to buy multifamily in the next year or two. I haven't seen anything really good yet. But from everyone I know who's really experts in this, almost everyone says it's inevitable that this is going to happen. It's just a question of when, as.
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Host 3 (Additional Host or Contributor)
You say that, that I know a lot of our listeners are also multifamily investors. Is there an indicator that you think people should be looking at to say, hey, if this happens, or I see this, therefore this is like a good time. Is there anything that clear is like a clear black and white or is it way more nuanced than that, like it probably is?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
That's a good question. I, you know, multifamily, I invest in it. I'm not like I would spend most of my time on residential should, I should be clear about that. But the things that I would personally look for is transaction volume to go up. And I know that that sounds like a little counterintuitive, but what's going on in commercial is that the difference between, you know, what sellers are asking for and what buyers are willing to pay, according to most research is about 10 to 12% off. And so that's really starting to, that's frozen the market. Right. And personally I think the buyers are going to be more patient. Right. People don't have to buy multifamily. There is going to be this forcing function on the sell side, which is the, the debt, you know, whether your rate locks are super expensive or you're being forced to refinance. Because in commercial real estate, you know, you're usually in a 3, 5, 7 year arm. That means that even if everyone's on a 7 year arm, in any given year, 15% of all assets are going to need to be refinanced. We know it's actually higher than that. So 20 to 25% of all assets are going to be to refinance. This is coming to a head, right. We're now three years into the tightening cycle. We're going to see this stuff start to happen, at least in my mind. And so what I think, you know, it's not always reflected in the data, but to me we'll see transaction volume tick up when sellers start to concede. And so that to me is going to mean that there's going to be more opportunity and that sellers are getting a little bit more realistic and that there's deals worth pursuing.
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Host 2 (Tax Smart REI Podcast Co-Host)
Makes sense. Makes sense. So basically right now it's a matter of when the floodgates open up and all these sellers have to sell transaction volumes on your tick up. And that's going to be a sign that there might be a buying opportunity.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
That's sort of what I think. I mean if you have access to, you know, commercial mortgage delinquency data, like that stuff also is really helpful, but that's so much in aggregate that I find it hard to really understand that, like on a market, by market level. Whereas, like I can understand, hey, in my market, transaction volume's starting to go up. Like, there's a little bit of juice here. Sellers are starting to get motivated. That's just easier for me to wrap my head around in terms of tactics. If you're looking nationally, which I do. But like, you know, most investors are really just looking in one or a few markets. You know, you could look at some of those like delinquency and credit reports, but they're, you know, it's a little bit more high level, in my opinion, than like this sort of boots on the ground trying to see like our properties moving.
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Host 2 (Tax Smart REI Podcast Co-Host)
Got it, got it. So I have to ask this question because, you know, this year we're expecting some new tax legislation with, you know, the new administration and whatnot. So for everybody listening who just needs a refresher, last year in 2024, there was a bill passed by the House that basically included 100 bonus depreciation that was ultimately shot down by the Senate. And there are various talks about when tax legislation will be passed. Whether it's in one bill within the first 100 days or within two reconciliation bills. We don't really know when it's going to happen. But how big of an impact do you think 100% bonus depreciation maybe has had in the past on the real estate market and may have again, if it does. If it does indeed come back?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
It's a great question. I'm not a tax expert, but my guess is a pretty big one. I do think that it matters, and I think it's sort of. My hypothesis would be that it did help extend this most recent cycle like a little bit longer than most people would expect because the. Not just bonus depreciation, but the fact that it was, could have expired and is sort of being degraded over time is a motivator for a lot of people who are professional real estate investors. And so I think it is a big deal and is going to create a lot of incentive for people if they get back into it. If it comes back. I do think that it will have a positive impact on transaction volume. I don't know if it's going to get people who are totally sitting on the sidelines back in, but I think professional investors who are doing this day in and day out are probably going to maybe be a little bit more aggressive than they are Right now I.
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Host 3 (Additional Host or Contributor)
Think my follow up to that would be if 100 bonus depreciation did come back, do you feel like it would change your buying habits?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Well, I, I need to ask you guys this because I don't really fully understand how it changes impacts me because I'm not a real estate professional. So correct me if I'm wrong, but I don't think it really is available to me except in like a short term rental loophole. Right?
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Host 2 (Tax Smart REI Podcast Co-Host)
Yeah. Yeah, right. I mean you pretty much hit the nail on the head there. It's, you know, for long term rentals or midterm rental investors, the way they're going to be able to use the losses generated by bonus depreciation is by qualifying as a real estate professional, which is 750 hours and more than half our total working time, which hard for people to qualify for. Some couples can pull it off in some situations depending on their, you know, their, their income streams and whatnot. Otherwise we are looking at the short term rental loophole. But the reason why I asked the question is because like just being a tax advisor for the last eight years, however long it's been now since bonus depreciations came out, I've just seen so much, so much people, motivated investors are motivated by the bonus depreciation that in my mind I'm like, I don't have any studies or a way to quantify it, but I'm like this has to impact demand in some way. But yeah, to your point, you need to be an active investor, you need either be a real estate professional or use short term rentals. It's really unlocked the power of what.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Bonus depreciation can do. Well, I'm glad my understanding was correct because for a bit there I was like, man, have I been missing out on bonus depreciation all these years. But I'm glad my understanding's correct.
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Host 3 (Additional Host or Contributor)
Sounds like you're filing a amended tax return for a couple of years. Yeah, maybe it's actually, as I asked that question, it's actually more of an impact for short term rentals. Right. As we think it, it's a little bit easier for a lot of people to meet the short term rental loophole. So Tom, as we think about that too, maybe it is just more of an impact for, yeah. Short term rentals or like we said, people who are full time in real estate can meet real estate professional status. Yeah, seems like that's certainly more of an impact.
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah. But just to play devil's advocate, like the last thing current short term rental investors need is more short term rentals, you know, so I think like, yes. Could it increase transaction volume for short term rentals for people who want to capture bonus depreciation? Yes. Does that mean short term rentals will be a good business? Not necessarily.
- [22:04]
Host 1 (Tax Smart REI Podcast Host)
With 2024 officially in the rearview mirror, now's the perfect time to start planning for how you're going to maximize your tax savings in 2025. With major tax changes looming under the new administration and IRS audits on the rise, navigating the task code alone is is now riskier than ever. Whether you're leveraging the short term rental loophole, claiming the real estate professional status, utilizing passive losses, 1031 exchanges, or anything in between, our expert team of tax advisors at Hall CPA has your back. We'll help you uncover hidden opportunities and avoid costly mistakes that could put you at risk during an audit. With potentially tens of thousands of dollars of tax savings online, why wait? Visit www.therealEstateCPA.com podcast to request your free a free 30 minute discovery call today. Again, that's www.therealEstateCpa.com podcast for a free consultation. Let's help you ensure you keep more of what you earn in 2025. That's all for now and we'll dive right back into today's episode.
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Host 2 (Tax Smart REI Podcast Co-Host)
You know, we just had John Bianchi on the other day. He's a big short term rental guy, you know, helps people find short term rentals. My biggest concern, I thought about this after we recorded the podcast, but this I think appropriate for this episode is like you spend all this money on a short term rental. Like it seems like what makes a good short term rental has changed over the last few years. You know, it used to be almost anything could be a short term rental, but now it seems like we're looking at, I've heard this from a few people now, these larger like four or five bedroom houses for groups. My biggest concern from the short term rental perspective is what happens when that's no longer in vogue.
- [23:29]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Right.
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Host 2 (Tax Smart REI Podcast Co-Host)
And they have short term rentals and what if they don't underwrite as long term rentals? Do you have any, any thoughts on that?
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Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
No, I think I'm very wary of short term rentals right now and I totally understand that there are people who can do it really well. But the reason I am one and done is I don't have the time to be a professional and expert at hospitality. And that's sort of what you have to do. You see hotels, they're constantly changing Their strategy, their marketing based on trends and traveler demand regulations that are going on in any given market. And I'm not going to stay on top of that. Like the thing I love about long term rentals is like there's no trends, it's people need a place to live. Like yeah, you got to update your bathroom different, you look at your kitchen looks different, but it's not, you know, fundamentally the type of asset that people want to live in has not really changed all that much. It's shifting to suburban more than urban. You know, there are things like that. Of course there are changes. But with short term rentals, you know, it seems to be changing almost weekly, you know, depending on what market you're in, especially if there's regulation. And you know, I think people are pretty bullish on the economy right now, but there's going to be a recession at some point. Like how does short term rentals react to that? You know, I'm not quite sure. And so I think that there's definitely danger in buying the wrong asset. I was actually had Avery Carl on the Biggerpockets podcast. I don't know if you know Avery, but she wrote a book on short term rentals. She's an expert at it. She does great at it because she knows what she's doing. She was talking about similarly like people, the common thing now is like to amenitize your properties. So put in this pickleball court or put in a whatever a putt putt court or. I actually was thinking about putting a golf simulator in mine because I just like golf. But she was saying like a lot of people are going way too far on that. And one, you have all this capex that you're sinking into the deal like way ahead of time. And then two, like think about the resale of that property. You're going to resell like a four bedroom, a house with a putt putt course and like windmills and a pink pickleball court like all over it. Like you're kind of locking yourself in to the strategy or you're going to have capex to get rid of that to sell. So I just think you need to be really good at threading the needle here and like one, figure out the right way to optimize your income. But two, maintaining that flexibility for divesting that asset if you want to or need to. And it's definitely possible. Like I'm not like a short term rental hater. It's just not something I've spent enough time to like. Understand how to do that correctly. But I do just want people to be wary that it's not just this easy thing that like you could do a couple years ago when there it was the Wild west and there was no one to compete against. It was very easy then. Now it's a much more sophisticated game, 100%.
- [26:20]
Host 2 (Tax Smart REI Podcast Co-Host)
So kind of just looking a little bit, I know we talked about before, like what the next few years look like in terms of or what they could look like over the longer term, five to 10 years. Do you have any insights on that? Maybe, you know, just for residential investors perhaps.
- [26:34]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
I think there's good strong demographic tailwinds for the next five to 10 years. Beyond that, I think there are some very big questions which we, we can talk about. But if you just like real estate, residential, so much demographics, everyone talks about interest rates. I do too. They are important over the short run. But if you are an investor in the long term, which we all, I think recommend, like you want to be looking at sort of the big macro things that are going on. And it's just that we're still in a demographic boom right now. Millennials are still in their peak home buying age. And the front end of Gen Z is a very big demographic too. And so we're going to see a lot of people in their late 20s, early 30s who want to buy homes, who are increasing the number of households for the next five to 10 years. So I think that bodes well alongside the fact that we are somewhere between 3 and 7 million housing units short in the United States. And so those two things, higher demand constrained supply prices go up. So those are good things. I'm also pretty bullish on rent growth over the next couple of years because the sort of flip side of low affordability in the housing market is that more people are going to rent for longer. And this is not something I would hope for. I don't think it's necessarily good for our society. But I do think that we're going to see more families, more young professionals, people who in previous generations would buy a home, choose to rent because the economics are clear that for a primary residence in the majority of markets, it's better to rent than to buy. That's not investors. That's not to say it's better to rent and do nothing. I think I would proposed to a lot of people to rent and buy rental property. I think that's actually quite a good plan for some people. So I think that's going to bode well for rents to at least outpace inflation, if not by more. And so I think those two things, and this third one is just speculation, it's not based on data. But I do think that when these things happen, when market conditions and expectations have to shift so much, it clears out a lot of people who are not really wholehearted in it. And I think there's going to be less competition in real estate investing over the next few years. I think that a lot of the Instagram investors and people who were getting into it and thought it was going to be easy are going to leave the industry. And I don't hope anyone loses their shirt. I hope those people, you know, do okay. But I don't think there's as much enthusiasm by the, what I would call like retail investor group as there was. And I'm not sure that's going to come back anytime soon. And frankly, as someone, I'm not a full time investor, but I would consider myself a professional. I think that I will benefit from that. There's going to be less competition, there's going to be more opportunity over the long run once people adapt and figure out how to make money in this new era. And I think there's plenty of ways to do that.
- [29:23]
Host 3 (Additional Host or Contributor)
One question I was going to ask you, as we talk about demographics, things like that, what about like migration? Right. I feel like several years ago is kind of like everyone because of COVID is like moving south. It was like sun belt, you know, kind of thing. And Tom moved from New York to Miami. And for those of you who have been listening to the podcast for a long time. Yeah, that's. That's been a conversation for years and years.
- [29:45]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
So I'm from New York and I was wondering if you were from New York, Tom, just the accent.
- [29:50]
Host 2 (Tax Smart REI Podcast Co-Host)
Yeah. The royal accents, the dog.
- [29:53]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
It's the talk, it's the coffee.
- [29:57]
Host 3 (Additional Host or Contributor)
But regarding migration, do you see as people move south. Right. Kind of around Covid, people are looking for warmer weather. Do you foresee any sort of change in that migration? And just a bit more of like where I'm coming from, we've seen so much in the news about floods in North Carolina. We've seen hurricanes in Florida, we've seen the fires in L. A. You've got all these natural disasters that are going on.
- [30:19]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah.
- [30:20]
Host 3 (Additional Host or Contributor)
Do you foresee that having impact on migration? And just even my first question, just in general migration, what are you seeing?
- [30:26]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Migration trends haven't really changed that much so far. We still see a ton of migration to the Southeast. And my guess is that that over the Next few years that's going to continue. I think that a lot of the, whether it's social, political, lifestyle reasons that people are moving to the Sun Belt are going to remain. The next part of this statement is just pure speculation. I think that will, I'm not, not reverse. I don't think there's going to be some like massive trend, but I do think we will see the top states for migration in the next, what they are five years from now or ten years from now are probably going to be different. And I do think that climate change is one element of it. We're seeing that, you know, it's become a political issue. I don't really understand why. I think it is a science issue, but it's also an economic issue. It's just becoming very expensive to live in disaster prone areas. And I personally, I believe the science and I think that it's going to get worse or more frequent at least in a lot of those areas. And it's going to get economically untenable for some people to live in those areas. That's one part of it. I think perhaps even the more compelling reason migration trends will change is affordability. That's, you know, I've said it a lot of times in the show, but like my thesis on housing, housing demand is about affordability. And a lot of why people move to the Southeast is over the last few years is because it was more affordable and it still is relatively affordable. Like you think of these great markets, these really cool dynamic cities with great economies like Charlotte or Tampa, they still have home prices less than the national media. And that's crazy. That's amazing. Like people are going to continue to take advantage of that, I think, because it's great. I do think we're seeing the rapid increase in prices around there and that that's going to shift. And so you start to see not just people. I think this is sort of one of the things that people miss on this is that it's not just people deciding to move because of affordability. Businesses decide to move because of affordability and businesses have located to the Southeast because it's affordable. My long term, 10, 20 year hypothesis is that a lot of that business investment and a lot of migration will shift back towards the Midwest. It is far more affordable if, you know, climate change is what scientists think it's going to be and they're right about their models, which is a lot of Fs that, you know, the Midwest Great Lakes region is relatively insulated and will have probably fewer impacts from Any climate change. And so you're probably going to see people attracted to those types of areas. Insurance costs are going to be lower, taxes are probably going to be lower because there's not as much needing to spend on infrastructure. That's just hypothesis. I could be totally wrong about that. But I sort of put my money on my mouth there, where it's there. And I've started buying in the Midwest because it offers good cash flow and I think the appreciation will tick up over the next few years.
- [33:25]
Host 3 (Additional Host or Contributor)
You buying in Minnesota?
- [33:27]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Not in Minnesota, but in Michigan. And I like Wisconsin a lot.
- [33:30]
Host 3 (Additional Host or Contributor)
Okay. Yep, I'm in Minnesota and.
- [33:33]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Oh, nice.
- [33:33]
Host 3 (Additional Host or Contributor)
As you mentioned the Midwest. I was, I was excited because I'm hoping for that because all my properties are in Minnesota, but.
- [33:40]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Well, Duluth is like, supposed to be like the most climate resistant place. Like, I'm not, I'm not like that into it where I think, you know, I'm chasing that. I just think generally speaking, it's an area of the country that's not that pretty prone to disaster. And like, think about businesses, they're super impacted by these things. Like business in la, businesses in Tampa, in Cape Coral, like, they're going to be impacted by these things and they might choose to, you know, there's all this excess manufacturing capacity in the Midwest. Like, they might choose to go back to that.
- [34:13]
Host 3 (Additional Host or Contributor)
Yep. Yeah. To me, it's every, every state, every region has their kind of like, I don't know, natural disasters of things that are trying to, quote, unquote, kill them in a sense. In the Midwest, it's like the cold and we've got furnaces for that and homes. So it's just like. Yeah. In 10, 20 years, I just see for myself a potential huge migration back if these things kind of around the world and whatnot continue to happen. I would be interested to obviously see what happens and talk to you in 10 years, but that's what I'm curious about to see.
- [34:42]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yeah, likewise. I'm. I'm very curious. I think no one knows, obviously, but, you know, no offense, Tom, I, I just, like, I worry about places like Miami. I. Not that, not like in the short term, but I just think it's going to get so expensive to live there that I wonder if people will stay.
- [34:58]
Host 2 (Tax Smart REI Podcast Co-Host)
Yeah, I mean, that's my concern about, about Miami too, is, is affordability in the longer term. And I mentioned that last week, on last week's episode, potentially buying something, renting it out as an Airbnb for now, not long term, but for now, just so I lock down a property, so I'm renting right now or perhaps investing in something that could help pay rent on another building at some point later down the line. But yeah, I could definitely see it getting crazy here, not just because of migration, but also, to your point, hurricanes.
- [35:25]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
And all that stuff. So, yeah, it's expensive.
- [35:28]
Host 2 (Tax Smart REI Podcast Co-Host)
We'll have to see.
- [35:29]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
And I think it's just, you know, I think one of the things that's kind of interesting, this is really getting into the weeds, but the replacement cost of homes is just going up. Right? So even if you had the same category number of buildings destroyed from a hurricane, the cost of it is going up. And so like, that is, you know, wildfires. And that's not just, you know, Florida. I think about this in California. I have a house in Colorado that had to be evacuated for wildfires. You know, I think about this all over the place. It's just like the replacement cost is extremely high. Construction is just so expensive right now that even if, you know, let's just say 100 houses burn in a fire, it's way more proportional. Even adjusted for inflation and everything. It's way more expensive to replace those 100 homes than it was 10 or 15 or 20 years. And that's, you know, something that's going to keep driving up insurance costs.
- [36:24]
Host 2 (Tax Smart REI Podcast Co-Host)
Yeah, yeah, it's definitely something you have to watch out for. And hopefully for everybody in California, they'll recover nicely. And yeah, going on right there.
- [36:31]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
But yeah, no insurance everywhere. You know, it's all over. Hopefully, you know, we get better at recovering at these things.
- [36:37]
Host 2 (Tax Smart REI Podcast Co-Host)
Yeah. I got a quick question. This is my final question. This is not real estate related, but, but, and I understand if it might not be in your, in your realm, but hit me. What are your thoughts on bitcoin, man? What do you think about bitcoin?
- [36:51]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Okay, I, I, I will start by saying that I'm not an expert, so don't, don't take too much of my comments here to heart. I'm not a crypto hater. I don't, I'm not someone who's like, oh, it's going to zero. It might, I think there's a pretty good chance it goes to zero. There's a pretty good chance it keeps going. I just, I don't like investing for speculation. And to me, bitcoin is pure speculation. I like real estate and I chose real estate as an asset class because it's something that I can have some semblance of control over, you know, if things aren't going Well, I can go in there and fix something myself or you can reconfigure the house. Like, with Bitcoin, there's just nothing you could do. You're along for the ride. And that's just not how I would prefer to invest. I see a lot of flaws in the logic that it's going to remain this, like, very, you know, profitable thing well into the future. And so I'm skeptical, but I'm. I own some bitcoin, you know, like, I'm still curious enough that I own some, but it's more fun for me than it is anything I count on. Because again, I guess the other side of it is not just the ownership is like, I am a professionally trained data analyst and there's nothing to analyze in bitcoin. It's like, sure, people say there's technical trading, maybe there is, but I'm not a technical trader. I'm not a day trader. I'm trying to like, buy long term assets that have intrinsic value and there's nothing to analyze. So I just, I have a hard time wrapping my head around it. Even though I do have some training in computer science. Like, I get the technology. People will probably accuse me from saying this that I don't understand the technology. I do. I just don't get the value. Right.
- [38:30]
Host 2 (Tax Smart REI Podcast Co-Host)
I'm in the same boat. I get the purpose of crypto in general. My biggest concern with bitcoin is it's been the thing for the last 10 years in the crypto space. But who's to say that's going to be the case in the future? Something else is not going to come along and take it out. But yeah, no, I agree.
- [38:47]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Exactly. People are like, oh, if the US dollar collapses, Bitcoin is going to be what people use. First of all, if the US dollar collapses, we have way bigger problems than what currency we're going to be using. Right. And second of all, it's like all of a sudden the biggest economy in the entire world is going to rely on a currency that only 20% of people own. Like, that's just never going to happen. Like the US Government would invent a crypto if, like, you know, like, there's just so many other things that can happen. It just doesn't really make sense to me, this idea that like, the world is falling apart and bitcoin is the answer. There's just, it's just a lot of logical leaps.
- [39:24]
Host 2 (Tax Smart REI Podcast Co-Host)
Yeah, no, I, I appreciate the conversation on that because I just see this thing going up every day. You know, it's doing its thing. But like I was like, I don't know what to make of this at this point. So definitely appreciate it.
- [39:35]
Host 3 (Additional Host or Contributor)
My last question for you, Dave. So you've seen a lot in bigger pockets, right? You're there, you, you see a lot of the community. What's kind of the sentiment of other investors? Like how are they seeing the market, things like that, other than just you, what's, what's the bigger pockets community saying?
- [39:49]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
I think there's sort of this division in sentiment right now where people who are not that into real estate are very negative about real estate. And I think people who are professionals and have been doing this for a while are all just like kind of continuing on. And we actually did this, we do this annual survey of our users at BiggerPockets and sentiment and actually the amount of people who intend to buy real estate in 2025 really went up actually over 2024. So we see 75% of our members intend to buy real estate in 2025. So I think that's super encouraging. Said that they were going to sell. So you know, just as a, as a very like high level summary, people are still bought in on the asset class. You know, I don't know if people are going to buy as many. You know, I would have to dig into this data a little more to see like if they're trying to buy as many. But I think overall people see that real estate has weathered a really challenging time and there are still challenges ahead. Don't get me wrong, there's still significant challenges with affordability, transaction volume. But I again I come back to this idea of like, what else are you going to do with your money right now we've talked about Bitcoin. It's not super attractive. The stock market's trading at what, 29 price to earnings ratio. It's like insanity. So like to me, if you're into real estate, the fundamentals are still there and if you're a long term investor, and that's what we coach people at BiggerPockets to be, it's still good time. And so I think that's sort of what's reflected in this data.
- [41:17]
Host 2 (Tax Smart REI Podcast Co-Host)
That's excellent insights because yeah, to your point, it's a big long term asset. I hope a lot of people who are listening to is take that away because I've just seen so many people, especially over the last few years, you know, think of it as like, oh, what do I do when I sell the property after I take the bonus depreciation or something like that. And it's really the wrong mindset to be in. You want to be in the real estate for the long term? Decades?
- [41:36]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Yep, absolutely.
- [41:38]
Host 2 (Tax Smart REI Podcast Co-Host)
That's how you build real wealth. So, Dave, it's, it's been an incredibly insightful episode. Always a pleasure having you on and, and discussing what's, what's in store for real estate. Where can listeners learn more about you and is there anything currently that you're working on that you want to, you want to mention?
- [41:53]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
You can always find me at BiggerPockets. I'm the host of the Bigger Pockets podcast, available on Apple and Spotify anywhere actually. And you can find me on Instagram where I'm at the data deli, if you're curious. I've been sort of on this rant for the whole year about like what I call this new era of real estate investing. And you can find more about that in my State of Real Estate Investing report. You can find that biggerpockets.com resources awesome. So we're going to go ahead and.
- [42:18]
Host 2 (Tax Smart REI Podcast Co-Host)
We'Re going to drop that into the show notes for everybody who is listening who just want to check that out, take a little bit of a deeper dive into the numbers behind market predictions and whatnot. But Dave, always a pleasure. I want to thank you again for joining us today.
- [42:30]
Dave Myers (Guest, BiggerPockets Head of Real Estate Investing)
Thank you both for having me. I appreciate it.
- [42:33]
Host 1 Closing Remarks
Thanks for listening to today's show. If you enjoyed the show, please find us on itunes and leave us a review. You can also email us at. Contact realestatecpa.com with any feedback or topic suggestions. We are always taking on new clients and with the new tax laws in play, you really don't want to navigate this alone. Let us help you save money on taxes with your accounting and CFO needs to become a client. Navigate to our client page@therealestatecpa.com and fill out a web form with as much detail about your situation as possible. Thanks so much for listening. Have a great rest of your week.