#376: 2025 Real Estate Trends You Need to Know Now! (ft. Dave Meyer)
Dec 30, 2024
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Dave Meyer, host of the BiggerPockets Real Estate Podcast and a market expert, discusses the evolving real estate landscape as we approach 2025. He highlights the current decline in transaction volumes and the 'lock-in effect' gripping homeowners, while maintaining an optimistic outlook for the coming year. Key topics include regional market differences and emerging opportunities in a transitional market. Meyer also shares inventive financing solutions, emphasizing patience and strategic approaches to navigating today's investment challenges.
The 'stuck era' from 2022 to 2024 has led to a significant drop in transaction volumes, impacting agents and investors alike.
Regional differences highlight the Midwest's growth potential, contrasting with challenges in other markets, emphasizing the need for localized strategies.
Deep dives
The Stuck Era and Its Impact
The period from 2022 to 2024 is described as the 'stuck era' in real estate, characterized by a significant drop in transaction volume. Transactions plummeted from highs of 6.7 million in 2022 to an expected 3.9 million in 2024, far below the long-term average of 5.25 million. This dramatic decline resulted from both decreased supply and demand, leading to feelings of stagnation in the market. A drop in transaction volume impacts various stakeholders, including agents and investors, as fewer options become available for buyers searching for properties.
Affordability and the Lock-In Effect
Affordability is identified as a core issue affecting both housing supply and demand. Rising mortgage rates made buying homes less accessible, creating a scenario where prospective sellers are hesitant to sell their properties, fearing that transitioning to a new home would be more expensive. This 'lock-in effect' results from the fact that around 80% of sellers also intend to buy another property, which complicates their decisions when the market is unfavorable. Therefore, the combination of decreasing affordability and seller hesitance has contributed to the current inventory shortages.
Regional Market Trends
Regional differences in the real estate market are becoming evident, particularly where affordable markets are experiencing growth while others face challenges. The Midwest, often overlooked, has emerged as a region with promising price increases due to its relative affordability compared to hotter markets like the Southeast. Surprising trends show that while some popular markets are struggling, others are experiencing rent and price growth due to greater demand and lower supply. As these trends continue to develop, investors are encouraged to pay attention to local dynamics to identify opportunities.
Cautious Optimism for 2025
Looking ahead to 2025, there is cautious optimism surrounding potential market improvements as some economic indicators suggest recovery. Experts anticipate a gradual decrease in mortgage rates, which could increase housing inventory and stimulate demand. Even though the market won't see a dramatic rebound in prices, the expectation is for a slow recovery that would last over the coming years. Overall, the real estate market is seen as still having strong long-term fundamentals, making it an appealing investment option despite the challenges present in the immediate future.
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🎙️ Episode #376 – We're finally moving past the "stuck era" of 2022-2024! Dave Meyer from BiggerPockets talks about why transaction volumes have fallen dramatically, which regions are still affordable, and what creative strategies generate the highest returns in today's transitional market.