2025’s Massive Opportunity for Real Estate Investing

Dave:
Hey everyone. Welcome back to the BiggerPockets podcast. Today we are making the case for real estate as an investing class. Now, I like to think that this show makes the case for real estate pretty much every week, three times a week, but my guest today is Ben Miller and he has a compelling case to share as well. Ben has more than two decades of experience in real estate and finance, so I always enjoy speaking to him and hearing about his insights on where the markets are going. And today he’s going to share his theory for why real estate investing remains a great asset class for people to invest in. Heading into 2025, Ben has four bullet points, which we’re going to discuss and debate, but I think you’ll probably be like me and agree with a lot of his reasoning. And what I like so much about this is that it’s a really zoomed out sort of long-term case for why it’s worthwhile to build a career around real estate or build a portfolio even if you’re working. So let’s welcome Ben to the show. Ben Miller, welcome back to the BiggerPockets Podcast. Thanks for being here.

Ben:
Thanks for having me.

Dave:
So Ben, I know you have a four part case for real estate. What’s point number one?

Ben:
Well, to put it in context, real estate, that’s institutional real estate, commercial real estate, private real estate has been hit hard. The last 24 months have been a recession for the business of real estate. So that doesn’t mean single family homes, but it means apartment buildings and industrial. And if you’re a broker mortgage business, it’s a recession in real estate. And I think that’s been confusing to our investors because it’s not been a recession for most other markets. Stock market at all time high. And you have the business of real estate, institutional real estate, recession, bottoming. I’ve seen investors actually, they really do chase the most recent return. So crypto has been hot. That’s where they go. If real estate’s been hot, they go there. So they have a lot of recency bias. And so stock market’s looking really hot. People are really optimistic and real estate’s looking not as attractive. And so I wanted to make the case for real estate because a lot of times what’s recently been hot doesn’t mean it’s going to continue.

Dave:
Yeah, sometimes you’ve already missed it. If it’s already hot, then you probably weren’t in position to take advantage of it. And now getting in now is probably not as good an opportunity.

Ben:
But nevertheless, people find it really hard if they weren’t in the stock market and the last two years went up like 40, 50%, they’re really feeling they’re kicking themselves and they can’t help. Maybe I have to get in now. So I have this sort of make the case of real estate. I have four major points I want to make.

Dave:
You’re doing my job for me. I love this. You organized the whole interview into four points. I want to hear ’em.

Ben:
Okay, so here the first, which is pretty simple, which I’m calling buy low, sell high.

Dave:
This is a new concept for me. I’ve never heard of this one before.

Ben:
Yeah, yeah. Well, if you look at the stock market, right, there’s lots of measures. I was looking at this Bank of America put out this chart last week, the market value to book ratio. So they saying, okay, how much is company worth in the stock market? How much is it worth according to their accounting, their balance sheet? Is it the highest it’s been ever? So just recently went higher than 2000 stock bubble.

Dave:
Yikes.

Ben:
It’s higher than it was in 2021. So by some measures, the stock market is more expensive than it has been in history.

Dave:
And just for our listeners, if you’re not familiar with the stock market, a lot of times the way we’ll measure this in a sort of macro aggregate sense is something called a price to earnings ratio is one way to look at this. Basically, how much is the stock worth compared to how much revenue or profit a business creates? And to Ben’s point, that ratio is extremely high. So stocks are very expensive right now, and I guess somewhat alarmingly might be more expensive than they were prior to previous corrections or crashes.

Ben:
So yeah, so the price to book according to B of A, it’s almost five and a half, and historically it’s maybe three priced to earnings, depends on which ones you want to use. I like to use a Schiller, which is a 10 year average rather than using a snapshot in time that’s at 38, which is higher than 2021, but not as high as 2000. So there’s different measures. The funny thing about bubbles is that bubbles typically go a lot bigger and longer than you expect. So it doesn’t mean that stock market is going to correct anytime soon. It may never correct. I’m just saying that if you are value investor, it’s expensive. The price is high. Warren Buffet most famous value investor, he’s gone all cash. He has more cash in history, 300 billion in cash. So there are some people, but not many who are still concerned to the stock market at this point. Most people are in the pool. And so the stock markets is high at the moment. And on the other hand, real estate is low. I mean real estate prices have fallen since 2021, probably 2030 in some cases more than 30%, 40%.

Dave:
That’s commercial, right?

Ben:
Well, yeah, I mean anything that’s priced by an investor.

Dave:
So yeah, that’s not like one single family homes or two to four unit residential properties.

Ben:
So the single family housing market’s different than the investor market. And the investor market’s priced based on discounted cash flows or expectations of returns. Interest rates is more mathematical and that world housing prices fall depending on your different assets. Let’s say 20 to 30%. So rate real estate is down, let’s say 20%, and the stock market is up 50%. And so purely on a value point of view, like real doesn’t look so bad comparatively if you’re thinking about it in terms of price, not in terms of momentum. Momentum investors buy whatever’s going up, value investors buy with sheep. And so this is more of a value investment case, which is number one.

Dave:
All right, I buy low sell high. I think this decline in values in commercial real estate has been around for a year or two now, and it’s felt a little risky, at least to me to get back in. But are you saying that right now the market is stable enough to start buying back into it?

Ben:
This is the hard part because it’s easy to imagine the stock market continues to tear for another year. And so you could be in it for a year and feel really smart and then all of a sudden it could blow up. You could imagine that it stops this tear. It is really, it’s impossible. Have a of where that is going. All you can sort of say is where it is today and where to stay is price is expensive. Real estate, it’s a little easier to actually get your arms around less complicated. And there’s less drivers. And the big drivers of real estate are supply, supply of new housing, supply of new rental housing and interest rates and interest rates. They hit the peak at 5.5% over the summer. They’ve come down 75 bips. And so it feels like interest rates the biggest driver of real estate. And we’ve already hit the bottom. I’ve already seen some recovery. So it doesn’t seem like real estate gets much worse, but it may take longer to recover than most people would want. And so it may be that it’s just people aren’t patient enough. I wouldn’t be surprised if the next year looks like the last year.

Dave:
And

Ben:
So you’d say, oh, smart to buy the momentum. But I also wouldn’t be surprised for everything that Trump in particular as a catalyst, just where everything changes and how it changes. God knows.

Dave:
Yeah, we dunno yet. So it sounds like what you’re saying is you don’t think commercial real estate will get worse, but is it the best investment next year unknown because other things like the stock market could be doing well, and even though we may be somewhere close to a bottom on multifamily assets, we don’t know when the upswing actually starts. It could be a long bottom.

Ben:
Yeah, I’ll try to flesh out that in some of my other points. But I think just the fundamental first point is that you can just look at the price and usually over the long-term price matters. I think so.

Dave:
Yeah.

Ben:
Well, but the short term it doesn’t. I mean it doesn’t. So I think that for some people who are not long-term investors, it’s not the very persuasive point yet.

Dave:
So first reason he believes real estate is still a great investing class, but he’s got three more points to share with us right after this break. Thanks for sticking with us. Let’s jump back into my conversation with Ben. All right, so that’s point number one is basically there’s good value in real estate potential to buy low sell high. What’s the second point?

Ben:
The next point I call inverse correlation. And so in my career actually, usually real estate and stocks move together when I started Fundrise in 20 12, 20 12 to 2022, so that’s what it says, 10 years. And sometimes stock market was a little higher, sometimes real estate was a little higher, but they moved more or less together for 10 years. And then in 2022 September, feds started raising interest rates. They both fell, but starting in 2023, they diverged

Dave:
And

Ben:
Real estate kept going down and stock market went on a tear up. And so the correlation broke in 23. What’s interesting about that is if you think about it as like, well, what are the possibilities? They continue to move in different directions or they start to move in the same direction again. So the interesting thing is what’s driving them in different directions is that high interest rates drove real estate down, but high interest rates didn’t seem to affect the stock market.
And that’s because what matters more to the stock market is how hot the economy is. So a hot economy drives stocks more than interest rates does, but actually real estate, especially rental real estate, not very affected by the economy. I mean people have to have a place to live, have to rent. So the real estate is a little bit more resilient in a downturn. So if there is a recession and the economy slows, that would likely hurt the stock market. Stock market would fall. And with it interest rates because the Fed would want to intervene to lower interest rates to stop at recession, and that would cause real estate prices to go up. And so what’s happened now with the break in correlation between real estate and stocks is real estate has become a hedge.

Dave:
Interesting.

Ben:
It started to act like a hedge on stocks where there’s a version where real estate does well and stocks do well, a normal economy. But if a world where stocks are falling real estate should actually do really well, really see a big pop and balance out some of the losses from the stock. So it’s not normally, real estate isn’t normally a hedge on stocks, but in this case I think it’s become pretty clearly

Dave:
I never thought about it that way. It’s true though.

Ben:
Yeah. So way it moves inversely for the moment. I think it’s going to move inversely with the stock market. Interesting.

Dave:
Yeah, so they’re inversely correlated. That was your second point. I’m curious, we’re talking mostly about, like you said, commercial grade assets that are valued by investors, but in 2023 or 2022, it does seem like the correlation between the residential housing market and the multifamily housing market sort of broke. We still see single family home prices going up counter to what’s happening in the multifamily space. What do you make of that divergence there?

Ben:
Yeah, I mean I think at this point it’s pretty clear to people in the industry because most people, and I’m talking about almost 80% of people have a fixed rate mortgage below, I think it was below 5%, but I think 65% people have a mortgage below 3%, even something really wild,

Dave:
Some crazy number.

Ben:
Nobody has to sell their house and nobody wants to sell their house and get an 8% mortgage or 7% mortgage,

Dave:
No way.

Ben:
And so the supply of new housing, supply of existing housing coming to market has dwindled to lowest has been. And so that lack of supply has meant that the demand has not had choice. If you take a market where maybe there’s a thousand buyers in a market, there may only be 800 homes. And so it’s kept prices up. And so what’s driving pricing is not interest rates, but actually supply and demand. And that phenomenon I think is pretty stable. Those fixed rate interests are not going to go away. And so I think the single family housing market is being priced more by consumer demand than by the investment profile. It doesn’t seem like a great investment to buy a new home and pay a 7% mortgage. I don’t think that’s as attractive as renting where you can rent in a much lower total cost per month.

Dave:
Not from a mathematical standpoint for sure.

Ben:
Funny enough, the history of single family housing going back a hundred years is more like what we’re seeing today. It used to be that single family housing was considered the safest asset in America. It had never gone down. The reason why the 2008 financial crisis happened is that all the fancy analysts assume that you could never have a housing collapse. And so we’re going back to normal. And so housing’s become really safe again.

Dave:
I’m so glad you said that. I wrote my own, yours sounds more organized than mine at this point. I just wrote a rant that the residential real estate market is just returning to normal and it was still a good time to be a real estate investor in the nineties, that was a pretty normal time for real estate in the seventies. There were still strong ways to make profits as a real estate investor, but I think a lot of people in this podcast, in our community included, sort of got anchored to this idea that you could have these massive profits that were driven in the 2010s. But that’s the anomaly, not what’s going on right now.

Ben:
Yeah, I’ll agree with you with a caveat that every decade had something weird happening. The seventies had the oil shocks and inflation, the eighties had the SNL debacle then all blew up in the nineties. Every decade seems to have its own flavor of special opportunities and challenges. Then the housing bubble in 2000 tens where the housing bubble collapsed and interest rates went to zero. So we’re in this new one, we don’t really know what it is yet. I think it’s going to be everything in the 2020s will look back as an aftershock politically, socially, economically to the pandemic.

Dave:
Alright, so we’ve talked about your two principles so far. First one was that by low sell high. The second one is an inverse correlation between commercial real estate assets and the stock market and how real estate is emerging as a hedge against the stock market. What’s the third principle?

Ben:
So the third point in my case for real estate is that housing is moving from an oversupply to an undersupply.

Dave:
Yes, the pendulum is swinging back.

Ben:
So just to sort of summarize that, in 2021 and most of 2022, interest rates were zero. There was a lot of hot money. Rents were growing almost 20% a year. And so a lot of developers started new construction, everything. I mean if they start new construction, multifamily, you probably don’t see it. They saw started it with industrial. There’s just a lot of new supply that started in that boom and it started delivering 18 to 24 months later when construction was complete. So it takes 24 months to build a big building. So they started delivering all these new buildings in 2024 mostly and some in 2025. And it just oversupplied the market with new construction, mostly apartments. And in some markets like Austin, it just flooded the market. And that oversupply crushed rent growth. Rent growth nationally, I think went to close to zero in some markets went negative 10%, maybe even worse.
And so at the same time in 2023 when interest rates had skyrocketed, supply had also skyrocketed and it was kind of a perfect storm for real estate. That’s why real estate value fell so much. There was a poor rent growth and really expensive interest. And so that’s where we were. But if you look forward, because start a new building, interest rate probably is eight, 9%, maybe 10%, you’re having to put up way more equity. So most people can’t start a new building. They can’t afford to, it doesn’t pencil. And so this new multifamily starts have plummeted, have fallen, I think 65%, I think they’re going to fall 80%. And so what’s going to happen is by 2026, so about a year from now, there’ll be no new construction. There’ll be no supply to the market and we’re going to go into a undersupplied market and that’s going to be great for real estate rents, great for real estate owners and it is essentially the opposite of where we’ve been.

Dave:
Yeah, it makes so much sense to me. Multifamily construction patterns is one of the easiest things to forecast. It’s actually really nice because like you said, we know when people file for permits and we know that it takes 24 or 36 months in certain cases. So you could actually look like in CoStar if you have a CoStar subscription or one of these other data providers, you could just see that the pattern is remarkable. Here it is showing if you’re not watching this on YouTube, he’s holding up to the camera the chart that I am trying to describe. But it’s basically just you see all these deliveries and then they just fall off a cliff and it’s going to totally change the dynamics. And it is sort of somewhat inevitable because you’ve probably heard this said before that the total supply of housing units in the United States is undersupplied.
Some people say it’s 1 million, some people say it’s three, some people say it’s seven, but there’s a general consensus that we need more housing units. But it can be confusing when we hear that there’s an oversupply of multifamily right now amidst that backdrop of a larger housing shortage. And Ben actually said there was a flood of supply and I think it helps people understand, I actually had someone else on the show explain it literally as a flood. You can be in a drought, just imagine a lack of water. You can be in a drought and you can have all of this water come down and completely inundate a landscape with water. And that will be really intense and you can’t even absorb all the water for a while. And then a couple of weeks later you’re still back in a drought. And that’s sort of how I’ve been thinking about it is we have this huge glut of supply, but project out a year, project out 2, 3, 4 years from now, we’re still going to be in the drought. There’s still going to be a excess demand for housing units in the US and that’s going to push up rents and valuations. We got to take one more break, but on the other side we’ll hear Ben’s remaining points on why he still believes in real estate.
And we’re back. Here’s more of me and Ben Miller

Ben:
When we move to the fourth point. The last one’s the hardest one, so we’ll see. But if interest rates stay high, that means construction stays low. That’s one of the reasons why I think housing or real estate is bottomed, is that two things that were hurting it were interest rates and oversupply. Oversupply is going away and if interest rates stay high, it’s definitely not coming back. And then that leaves you this question of, well, are interest rates going to keep coming down? I think that’s the hardest one to call. I’m going to make an argument around it, but I think it’s the most unpredictable.

Dave:
Yeah, I agree. And I think it is the most unpredictable, and you hear people making predictions all across the spectrum. Some people are saying, we’ll get to 5% next year for a 30 year fixed. I don’t personally see that coming. I do think that they’re going to stay a bit higher for longer. And to your point, I think that that will impact construction. We also are hearing from president-elect Trump that he’s going to implement tariffs, which could make materials or construction more expensive if we have a reduction in our migrant workforce that can make labor more expensive for construction. We did a show recently, we were sort of reviewing some of the predictions for the housing market, and Redfin said that they are expecting a boost in construction due to deregulation, and I’m not sold on that. Have

Ben:
They ever built anything?

Dave:
Yeah, right. It’s like I get that there might be less regulation, but it’s just going to be too expensive to build. So I don’t know if I buy that.

Ben:
I know what I’m talking about. I’ve developed a lot of real estate, I’m going to say millions, a square feet, but a lot, a lot. And all regulations at the state and local level permits or counties and cities, federal, there’s no federal regulation building anything. So I don’t understand what they’re talking about. But I mean, going back to your main point, and actually it was on my caveat, my ps, so I’ll just do that before interest rates for tariffs. So I have an argument, I believe tariffs going to be great for real estate. People are worried about tariffs being inflationary. And I think that people have forgotten that inflation’s actually can be good for real estate because let’s just say that Trump passed, let’s say 20% tariffs around numbers. That means that every single import’s 20% more expensive. And let’s say that it costs 20% more to build a building because steel and maybe labor’s more expensive because we deported people. Well, that’s great.

Dave:
It makes the existing supply more valuable.

Ben:
We own 20,000 real estate apartment units. If it costs, let’s say $200,000 to build a unit, and now it costs $240,000 to build a unit, 20% more expensive, that just means our apartment buildings are probably worth about 20% more. So, okay, fabulous. And actually I think to some extent tariffs are recessionary. They are tax on consumers, and that’s great too. That means that it slows the economy down, then they can lower interest rates. And so real estate equity is hedge, right? It’s not good for stocks, tariffs not good for stocks, but I think they are good for real estate.

Dave:
Yeah, that’s an interesting point. Yeah, that is the logic that I was going with when I was sort of reviewing these predictions. I was like, it’s just going to make everything more expensive. People are not going to start building into that environment, but people who hold existing homes or existing assets are going to benefit from that. So I agree with you. I like your letter. Is this going to be made public?

Ben:
We’ll see, we’ll see. I write stuff and then I circulate it internally and then it gets torn apart.

Dave:
Yeah. Okay. Well, I think the broad picture I generally agree with, so it seems like you’re optimistic, if I can summarize, tell me if I’m wrong,

Dave:
You’re

Dave:
Optimistic about real estate because it is relatively valuable, especially compared to the stock market. It is a hedge against a very hot stock market. And if there are these situations where there are tariffs or increase in construction costs and interest rates stay a bit higher, then that could only bolster values for real estate in general.

Ben:
Well, the last one is whether interest rates come down or not.

Dave:
Okay.

Ben:
We didn’t get to that, but

Dave:
Well, let me ask you that. Say more about what you were thinking there.

Ben:
Okay. Well, I mean, as I said, this is caveated by being the one that has the most amount of drivers in the world. So my argument is that one, that the main reason we had huge amount of inflation in 2021 was the pandemic and all the money they printed to stimulate the economy during the pandemic and the shutdowns, all of that basically messed up supply and demand, and that caused prices to go through the roof. That’s in the past, that’s gone. And so 99% of the source of inflation is over. That’s a fact. The question is I think too is will deficits drive inflation? And historically there’s actually very little relationship between deficits and inflation because you saw it in 2010s. There were huge deficits all through the 2010s, and we didn’t see any inflation. Inflation was about 2% in the first Trump administration and interest rates were at 2%, we’re going into 2025 and inflation’s two and a half, 2.8%, and interest rates are 4.6%, so they’re a lot higher. So I think there’s a lot of room there for ’em to come down. And the last thing, which is going back to our bread and butter real estate, the main reason that inflation is high today, the main driver of inflation, according to the Bureau of Labor Statistics is real estate is real estate rent. It’s

Dave:
French.

Ben:
Yeah. Yeah. It’s called owner equivalent rents. And according to the BBLs, and essentially how they calculate consumer price index CPI is that rent growth is at 5% a year. And I know it’s at zero.

Dave:
Exactly.

Ben:
So I think it’s lagging by a lot that government statistics are lagging in the privacy sources of data and that when it comes in line, eventually you would actually be able to see that inflation is pretty much dead. It’s gone, and that’ll allow the Fed to lower interest rates.
And so I think that yes, there could be something surprising that could cause interest rates to go back up because of war, or we have another pandemic, God knows avian flu. But putting those aside, I think the general direction of real estate is down. Trump wants it down. The Fed thinks worried about unemployment, and so it seems like it’s a good bet. It’s just like, will it get down to 3.5% for fed funds rate or will it get to lower? But it’s not going to, I think it seems realistic, the betting money in the capital markets is that it’s going to come down a decent amount and that’s going to be good for real estate.

Dave:
Yeah. Okay. Well, I’m glad to hear you’re optimistic. I do think the path is down. Personally, I think it’s just going to take a while. I don’t know if it’s going to be as quick as a lot of people in the industry think. I just wonder if bond yields will stay high because the fear of inflation, if we start to implement tariffs or lower interest rates, there is I guess some concern that inflation will reignite.

Ben:
Yeah. The financial markets always fight the last war, so they were obsessed with the great financial crisis I was. Now everybody’s obsessed with inflation. It usually protects you from it happening. So interesting. It’s probably something else. I mean, if you go back and just say, it’s always the stuff that people forget has been too long ago. And so the thing has been too long, it’s been bank deregulation. Interesting. The 1980s Reagan deregulated the banks and they blew up the entire economy. So every time somebody said deregulation, I always ask, do you mean the banks? I hope you don’t mean the banks. Yeah.

Dave:
Interesting. Yeah, that’s a good point because it feels like that happened with inflation, right? It was too long since we had inflation, and so people took their eye off it.

Ben:
Yeah, 1970s was inflation, 1980s was bank deregulation. So I’m like, okay, that’s what I

Dave:
Expect. Alright. Well Ben, this has been awesome. Thank you so much. I love that you organized your thoughts about real estate so neatly. It’s a really, in my opinion, compelling case for the long-term of real estate. I agree with you. I don’t know exactly when these things start. Is it six months from now? Is it a year? But I do think when you look and zoom out, a lot of what you’re saying makes a lot of sense. So thanks so much for sharing it with us today.

Ben:
Yeah, appreciate it. Thanks for having me.

Dave:
Thank you all so much for listening. We’ll be back with another episode of BiggerPockets Real Estate in just a couple of days. See you then.