171: The 2022 Housing Market Explained: Is Now a Good Time to Buy? w/Dave Meyer

This is Real estate rookie episode 171.

To me, the best way to invest is real estate. But in general, because of the way the economic and financial world is right now, the only way to realistically build wealth is to actively invest your money.

My name is Ashley Kerr and I'm here with my co host, Tony Robinson.

And welcome to the Real estate Ricky podc, where every week, twice a week, we bring you the inspiration, the information, the education you need as a new real estate investor to get started or keep going if you already started. So, Ashley, what is going on in your neck of the woods today? What's new?

Not much, actually. I'm finally getting ready to have my surgery on my knee, which by the time this airs I'll already had it. But my injury happened in December and I'm finally just getting surgery now. So looking forward to getting that over with and starting rehab all over again. Yeah, but I actually, I did have something super exciting that happened today. I had somebody call me saying they own a campground and that they would be interested in selling it to me. So that was super exciting. Yeah, I had just. A friend had actually told me about the campground and I sent them an email and so I just heard back, they ended up calling me and like, yeah, we'd definitely be interested then.

That is awesome. Actually. Where is it at? Is it in New York?

It's in New York, yeah.

Okay, that's awesome. How many, what's the. Is it spot pads? Spots?

Yeah. So this is actually cabins. It's 28. Yeah, 28 cabins and then there's about 50 RV hookups.

Wow, that's awesome.

But it's always exciting when a lead comes in and it's off market too, so you're not competing with a ton of people. So. Yeah. What about you, Tony? What do you have going on?

So much. So much is going on right now. We actually just took one of our newest short term rental listings live this morning. So that's exciting. We've got four more that we're closing on next month. We've got another four rehabs we're working on. So we're just like all over the place right now. But what's most exciting is that I think we're inching towards closing on our first resort. So it's a 24 cabin resort and a lake town here in SoCal. The buyers were initially asking for 10 million. Our first offer was like 5.5 million. So like way off. They didn't even counter with that. But I think we're going to end up closing somewhere around like 8 million or something like that. So it's crazy actually. Like I can buy single family short term rentals like all day at this point, you know, and not really lose any sleep over it. But we're going to have to syndicate this property and, you know, I'll have to like raise money to make it happen and I don't know, just due.

Diligence on a property of that.

Totally. Right. Like, I'm excited if we get it, but I'm also like, really nervous, you know, it's like, am I going to be able to like really knock this out the park? So I don't know. We'll see. I'll keep you guys posted as things go along.

I know how much you've wanted like a resort area. You've either a motel or something that you can do short term rentals out of. That's just more than one unit. So this is awesome. I'm so excited for you.

Yeah, fingers crossed. We'll see.

Well, if you need any help with the due diligence, my business partner Daryl, that, you know, he's done it all on the campground we have under contract. So I'm flying.

You guys are my first call.

Okay.

Tell Dur if he does that, I'll forgive him for not saying goodbye to me when we saw him in Denver.

Yeah, he had extreme anxiety over not saying goodbye to you and Sarah in Seattle.

Yes, in Seattle. Yeah. All right. We got a good episode today, Ash. Right. Obviously this show is about like the rookie investor, but from time to time we bring on experts. And I really love the expert episodes. Like our most recent one was with James Danard and he came on and gave like a master class in flipping. You know, we've had other folks and today we've got Dave Myers, who is the. What's his official title? The VP of Data and Analytics.

Data and analytics, yeah.

Yeah. So Dave is like a wealth of knowledge when it comes to macroeconomics and using data to make good decisions as a real estate investor. And he gets into so many good, juicy topics throughout this entire, entire, entire.

Episode, listening to Dave talk about what's going to happen, what he forecasts will happen, but he gives you why he's forecasting that or why he thinks that's going to happen. Looking at historical trends and data. He also tells you where you can find that data yourself. So if you want to go and research your market specifically, this is the episode you guys have to listen to. Or if you're trying to decide what strategy you want to use going into 2022. What's the best? He talks about that too. So I think if you are unsure if you should buy a property or not because of everything that's going on in the world right now, are interest rates going to rise? Things like that, in the war in Ukraine? Listen to this episode and I think that it will give you a reason to overcome your fear or whatever hesitation you have as to why you haven't taken action on buying your first or next property.

The only thing I'd add to that is like Dave made a really interesting comment about how he thinks that there is possibly a price correction coming, why he's buying property still anyway, and I think that just listen for that segment because I think that's a really, really important point for a lot of our rookies to understand.

I once joked that I needed an assistant just to manage all of my assistants, because every AI tool I tried did one thing and then made me do 10 others. AI I thought was meant to make work easier, not heavier. Superhuman changes that. It's a connected productivity suite built for the way modern teams actually get things done. Grammarly, Mail and Coda move as one system. Grammarly handles clarity, Coda keeps everything structured, and mail brings your focus back. They anticipate what you need and adapt.

To how you work.

When you start writing, it helps you say things precisely when you're organizing your work, everything stays connected. When you switch between projects, you don't lose your flow, and that is what AI should feel like. Effortless focus instead of friction. My assistant's assistant, Superhuman can help bring you back to the work that matters. I'll have to work on saying assistance assistance on my own though, because man, that is difficult to say. Unleash your superhuman potential with AI that meets you where you work. Learn more@superhuman.com podcast that's superhuman.com podcast what.

If I told you you could forget.

Everything you know about investment property loans? Because Host Financial is rewriting the rulebook, tossing out those pesky DTI restrictions. They focus on your property's income potential. No tax returns or personal income statements needed. Simple, efficient and tailored for investors. Like imagine a lender that sees the gold mine in your property, not just the numbers on your paycheck. That's the Host Financial difference, and they're approved in 47 different states. So your next big deal could be just around the corner. Ready to unlock your property's true potential? Visit hostfinancial.com don't let old school lending hold you back another day.

That's host financial.com landlords here's a quick tip.

A standardized checklist for property inspections can save you time, money and headaches. Preventative maintenance means fewer expensive surprises later. Want to save even more? Rent Ready helps you stay on top of rent collection, lease management and maintenance requests all in one easy to use platform. And right now you can get six months of rent ready for just $1. With promo code BP2025, visit rentready.com that's R E N T R E D I.com and use code BP2025 to get started.

Dave, welcome to the show. We have had you on here before and it is always a pleas but why don't we kick it off for our new listeners with you telling us a little bit about yourself and some background on you.

Great.

Well, thank you guys so much for having me back. You know, I sometimes co host the regular show, but I actually, I admit I listened to Real Estate Rookie a little bit more than the other show. I know I'm probably not supposed to say that, but I kind of consider myself a rookie still. And I love you guys. So I'm really happy to be back here. I am the vice president of data and analytics at BiggerPockets. I've worked here for about six years and in that role I have the responsibility of doing all sorts of internal stuff behind the scenes which none of you listeners probably care about. But the fun stuff I get to do is look at the housing market and economics and interpret a lot of that data for BiggerPockets listeners and BiggerPockets users. And I have also been investing in real estate for about 12 years, mostly in Colorado. I'm primarily a buy and hold investor. I do have one measly short term rental, Tony, so nothing compared to you, but I'm pretty happy with it so far. But yeah, I've been investing for 12 years and about three years ago or two and a half years ago now I moved out of the country and so I've sort of been investing passively for the last couple of years, but I'm really eager to jump back in to the active investing world. I'm leaving for the US to do a little bit of a trip to start scouting some new markets which I'm really excited about. That's about where I'm at. But real estate is so much of my life, whether through its investing or my full time job at BiggerPockets. And I'm very happy to be here talking about it.

Dave, what made you get interested in real estate investing. First of all, was it because you started working at BiggerPockets or was it something before that?

No. So I guess I've always sort of been entrepreneurial. When I was a kid, starting at 12 or 13, you know, I wanted to have some money, and so I would walk dogs or shovel driveways. And I did that through college, started some small businesses, and always was just kind of trying to find ways to bring in additional money on top of my full time job. And I told this story on the real estate show a couple of years ago, but the way I got into real estate was really serendipitous. I was going skiing with a friend of mine who really did not have his stuff together very well, but he bought a rental with his girlfriend at the time and they were absolutely killing it. And I was like, if this guy can do it, I can absolutely do it. And went to a couple of friends of mine who had more money than I was. I was waiting tables at the time and found a deal and.

Convinced them to go in on this deal with me. I borrowed the money for my portion of the down payment as a secondary lien. And so I just hustled my way into it. And for like five or six years, I just did two deals. And then in 2016, I had been working in tech for a while. I've always sort of been into data and analytics and I was just like, I really like doing real estate and I really still like doing analytics and software. And I just googled like real estate technology jobs. And I had never heard of bigger pockets. I found bigger pockets. It was like a mile from the the house hack I was living in. And I applied and got interviewed simultaneously by Josh Dworkin, Brandon Turner, and Scott Trench, all sitting on a couch with me. And luckily they gave me a job. And that was six years ago.

Dave, what an interesting story you've got, man. And I love how, just like me, your journey with biggerpocket started with a Google search. Right. I feel like that's how so many people kind of get connected with the brand. Right. I think I was googling like how to become rich through real estate or some crazy thing, and I ended up on the forums. So, Dave, I just want to get some clarity for folks. You say that your title is VP of Data and analytics, right? What the heck does that mean? Right. Like what kind of data and analytics are you looking at? What's some things that like, give me some context of what that even means.

Sure.

So the behind the Scenes stuff is me and my team look at all the information that's coming in from Bigger Pockets and help the other people in the organization make decisions. That's really what analytics and business intelligence is all about about. So we'll take in data about what forum topics are most popular, what topics are people really interested in that will help the marketing team or the content team use that information to make decisions. And in the second part of my job, which is sort of the external facing role where I co host or guest host the podcast or make YouTube videos, I try and do the same thing. I try and take data this time externally that's coming from the housing market or from the federal government or wherever it's coming from and help investors make decisions. And that is what I've been focusing on more over the last couple months because as you guys are probably aware, things are changing super rapidly right now. The housing market is a bit confusing, especially for people like rookies who aren't as familiar, haven't been through many market cycles. So BiggerPockets and myself have really been focused on helping real estate investors update their strategies and form their strategies based on this sort of unique market cycle that we're in right now.

Dave, can you give maybe three different ways that rookie investors could use the Bigger Pockets website to find this kind of information? What are the best resources available?

Sure.

So I am always releasing content on the blog, so that's one way to find it. And you can just search my name or just go on there. There's usually something out there. The second thing is not on the site but on YouTube. Every Friday I do a YouTube video about the market or some trend that's going on that real estate investors should be paying attention to. And the third, I guess, am I allowed to say this? We are releasing a new podcast and online presence for a new show that we're creating called on the Market which is going to be all about this helping real estate investors make decisions based current trends, economics, news. And so that will be launching around the time this episode's coming out. So that will definitely be something all the listeners should check out.

I am so excited for this podcast. As soon as I got wind of it, I'm so excited I listened to AJ Osborne forecast economics and talk about trends and stuff is to like relax me listening to it. So I'm very excited to hear your guys's podcast. So who is going to be on this podcast with you?

Yeah, so it's going to be really fun. We're going to have myself I'll be the host moderator and we'll also have James Danard, Henry Washington, Kathy Fettke and Jamil Damji. So it's going to be a rotating group so you'll see two or three of them each week in addition to myself. And we're just going to be breaking down really important topics that you should be paying attention to. But we're really trying to make it fun. We're going to be playing games, it's going to be light hearted and it's not this super serious news show. I guess not everyone's like you, Ashley, and who relaxes to the sound of economic data. So we're going to try and make it really fun and engaging at the same time.

Yeah, I think most people are probably not relaxed by heavy economic data. But you know, what's that shirt say, Ashley, about the spreadsheets?

Yeah, a lady in the streets about a freak in the spreadsheets.

There you go.

I've had like I think four people send me that T shirt in the last two years since I've had.

That's so funny. But I do think it's true. Like even if economics or data isn't your thing, there is comfort at least to me in knowing the numbers. Being able to analyze a deal or to formulate a investing hypothesis or thesis that you operate against is super comforting to me. So I feel the same way, Ashley, and hopefully people who don't automatically or by default feel that way will enjoy the show because that's our goal, is to give you that confidence about investing and formulating your own plan but making it fun and accessible at the same time.

Well, I think just the fact that you guys are taking all of the information and compiling it so it's easy for real estate investors to understand. That's the great part of it is that you don't have to go out and try and figure it out on your own. You guys are bringing it all, condensing it. This is what you need to know as a real estate investor. So I think that is the true value right there.

I want to add one thing, Dave, because I'm so glad you brought up the data component. I feel like a lot of new investors, especially you know, when they're working on that very first deal, there's a very big emotional factor that plays a role in that first deal for people. Right. As an experienced investor, like you can toss out numbers and put out offers like all day, but for someone that's new, there's a very big emotional factor that plays A role in the decision making process. So for you, Dave, I'm curious, right? As someone who's very deep into the data, very deep into the analytics, how do you weigh the difference between like your heartstrings, your heart, your emotions and the data? Are you just stone cold? If the numbers work and this is what we're doing, how do you balance those two things?

I honestly, even being a really data oriented person, I am not as stone cold data as you might expect. But because I think I am relatively a conservative investor, I have a lot of financial anxiety and want to invest in a way that is appropriate for my own risk tolerance. And I think that's one of the things I recommend to people. And at the end of the day, yes, when numbers work, I try to pull the trigger. But my own criteria, the criteria I make for myself are probably more conservative than some people. And I think that's okay. Especially if it's your first deal. I don't think you need to hit a home run in your first deal. I think getting that first deal is far more important. But if you are uncomfortable with what someone else tells you, you should beat your criteria. I think that's okay. Like you shouldn't be embarrassed by that or think there's something wrong with that. You just need to set that criteria so that when you do see a deal that meets your criteria, then you can take the emotion out of it and you can operate against it. But in setting your strategy, you have to be honest about who you are and what you're comfortable with.

Dave, what a fantastic breakdown. I mean, I think how you described it is the exact same way that I've kind of approached investing as well is that everyone's going to have their own kind of investor personality, right. Or their risk profile, as you said. I feel like I'm somewhat conservative, but I'm willing to take calculated risks. Right. I know other people that aren't willing to do that. I invest heavily in short term rentals. I know some people that say you shouldn't buy a short term rental if it doesn't work as a long term rental. I don't believe in that. Right. Like almost none of my short term rentals would make money as long term rentals. But I'm okay with that risk. Right? I'm okay with that risk. So you've got to figure out what works for you. But the criteria piece I think is super important. As you kind of start to narrow in. These are the kind of properties that I'm looking for. Here's the kind of return that I want, here's the size that I want, here's the kind of neighborhood that I want. And as long as you're able to check those boxes, it becomes a little bit easier to kind of move forward. Awesome, Dave, man. So I really want to get into just kind of picking your brain because you're just like a wealth of knowledge that we got to share with our rookie audience. So the first question I have for you, Dave, and this is one that we get all the time, is, is 2022 the right time to buy? There's so much going on. Should I wait for this impending crash? Do I wait to figure out what's going on with Russia? Do I wait to figure out, like, should I just buy crypto instead? Is 2022 a good time to buy real estate?

This is a great question and I get it all the time and one I love talking about. And I think that the best way to answer this is to start by looking in a historical context. Because if you look at any moment in time, like, is right now a great time to invest in real estate? That's a complicated question to answer. We have, there's a ground war in Europe in 70 or 80 years. You know, we're seeing interest rates going up, inflation's at 40 year highs. Those are really, it's complicated on a week to week basis to decide if that is a good time to invest in real estate. However, if you look at historical trends, I think the answer is overwhelmingly yes, that investing in real estate or just investing in general is not just a good idea. It is necessary to build and preserve wealth. And there's all sorts of reasons for this. But I think if you just look, look over the last 15 years and the trend goes back much longer than that, 40 or 50 years with interest rates so low. And even though they're rising right now, they are still near historic lows and probably will remain that way even though the Fed is raising rates. And that just bolsters asset prices. I mean, I can get into the details of why, but you see when interest rates are low, you see the stock market go up, you see cryptocurrency go up, and you go real estate to go up. And although rates are rising and there probably are going to be some fluctuations in pricing in all three of those markets over the next couple of years as rates start to go up, the government policy or the Fed's policy over the last 15 years is not showing any signs of changing. And that means we're probably going to continue to have relatively low interest rates, which means there's a lot of easy money. And for better or worse, I'm not making a judgment on this is the right policy or not, but it is the government's, the Fed's policy over the last 15 years, and rates have been coming down since 1970. So you see this trend, and in data analytics we say the trend is your friend, right? You look at these little things on a weekly basis and it gets all crazy and sounds nuts, but you see this trend over 40, 50 years and I've seen nothing that suggests that's going to change. And so as long as there's sort of this easy money policy where interest rates are relatively low, it really, really incentivizes people to invest. And because rates are low, that means that there is no viable way to use a savings account to save for your retirement or to build wealth. And so your only option is investing. And we can get into this. But to me, the best way to invest is real estate. But in general, because of the way the, the economic and financial world is right now, the only way to realistically build wealth is to actively invest your money.

Dave, you talked about historical trends in there and you said that's where you looked at historical trends. Can you kind of just describe for somebody what that entails looking at historical trends? Like what did you see in the past that is helping you kind of forecast what you expect for the future?

Sure, absolutely. So the number one thing I think about when I just look at trends in real estate investing are one is interest rates. Because, you know, it sounds so boring, but it makes such a big difference about the way the world works. It's kind of crazy. And so interest rates back in the mid-1980s were up at 15 or 17%. And what that means in like day to day reality is like no one wants to buy real estate then, right? No one wants to pay 17% on a mortgage, no one wants to pay 15% on a mortgage. And it makes people less inclined to invest. But when you could borrow money at 3 or 5% like you can now, then it incentivizes people to invest. And this trend has been going on. So more and more money has been moving to the investment world and that is increasing asset prices. So that is a trend that I think, I think it's starting to bounce back up, but is likely not going to change dramatically. I don't think we're going to see 7 or 8% mortgage rates anytime soon. The other thing which I haven't touched on Yet. But I think the other like, historical trend that I think is super important in the context of real estate investing is just basic supply and demand. There is just not enough supply in the United States. And there has been a. Most people believe, I should say that this is. We had a guest on the real estate show named Ivy Zelman who thinks differently about this and brought up some really good points. But I think most people believe that ever since the Great Recession, we've been under building in the United States, which means there's just not enough supply of houses. There's just not enough places for people to live. And the basic rule of economics is if demand remains stable and demand is actually up right now and supply is down, prices are going to go up, up. And so that is why we're seeing the price increases we're seeing right now is interest rates are super low, demand is high, and supply is low. It's a perfect storm. And although these trends might alter a little bit in the coming years, the long term trends still point to tailwinds for the housing market. You know, it's still pointing to maybe things go up and down over the next year or two, but in 10 years, like the housing market is going to be way higher than it is right now. And that is almost certain.

Certain.

Dave, you're dropping so much good stuff right now. Like my head's spinning a little bit. I'm like scribbling feverishly over here to make sure I've got so many follow ups where I don't want to forget anything.

I feel really relaxed. Tony.

This is like a day off for you, actually.

Just hanging out like a Sunday brunch for Ashley.

I once joked that I needed an assistant just to manage all of my assistants because every AI tool I tried did one thing and then made me do 10 others. AI I thought was meant to make work easier, not heavier. Superhuman changes that. It's a connected productivity suite built for the way modern teams actually get things done. Grammarly, mail and coda move as one system. Grammarly handles clarity. Coda keeps everything structured, and mail brings your focus back. They anticipate what you need and adapt to how you work. When you start writing, it helps you say things precisely. When you're organizing your work, everything stays connected. When you switch between projects, you don't lose your flow. And that is what AI should feel like. Effortless focus instead of friction. My assistance assistant superhuman can help bring you back to the work that matters. I'll have to work on saying assistance assistants on my own though, because man, that is difficult to say. Unleash your superhuman potential with AI that meets you where you work. Learn more@superhuman.com podcast that's superhuman.com podcast tired of traditional lenders holding you back? Host Financial is here to change the game.

They've ditched the DTI restrictions and they.

Zero in on what really matters. Your property's income potential. So no more chasing papers for tax returns or personal income statements. Think about it. A lender that values your property's worth over your paycheck. That's the host financial difference. Approved in 47 states. They are ready to help you make your next big move. Curious if you qualify? Just head over to HostFinancial.com and find out. Stop letting outdated lending practices hold you back. That's HostFinancial.com where your property's potential meets.

Unlimited Financing Inspecting your rentals again? Here's a pro tip. A simple checklist makes sure nothing gets overlooked. It saves you time and costly repairs down the road. And when it comes to managing your rentals, Rent Ready makes everything easier. Rent gets paid on time, leases get signed online, and maintenance requests don't get lost in your inbox. And if you're a BiggerPockets Pro member, I've got great news for you. RentReady is already included in your membership for free. Don't leave it sitting on the table. Log in to your BiggerPockets Pro account and start using RentReady today. It's 3am on the 6th and you're wondering if you should text your tenant about rent. Here's a better idea. Don't with avail, rent collection runs on autopilot. Automatic reminders go out. Payments land directly in your account. Late fees trigger when needed. Tenants can enable auto pay, and with fast pay, you can get paid as soon as the next day. Sign up for free at avail CO BiggerPockets. That's a V A I L co Biggerpockets Avail handles rent collection so you can actually get some sleep.

So one thing I want to go back to that you mentioned, Dave, that I felt was really powerful. I want to make sure the guest picked up on that. You said not only is it a good idea, but it is necessary to invest your money right if you want to build wealth. And I think that is so incredibly true. We've seen, right? Inflation is at like record highs right now and imagine all the people that just had their money sitting in a savings account. Like how much value did you lose over the last 18 to 24 months by letting that money sit There. Now think about the people that invest that same capital into real estate. How much equity have you gained in that same time period? So many people are on the sidelines, sitting, waiting for this big correction and they're missing out on huge, huge opportunities. So, Dave, you talked a lot about interest rates, so I want to dig in on that a little bit. I hear a lot of people, not necessarily other investors, but a lot of kind of common folk who are still kind of doing the W2 thing and aren't investing themselves, talk about how, oh, interest rates are going up. So that means housing prices are going to come back down. So I'm waiting to buy because I want to see these prices come down. Based on the data that you've seen, do you believe that there's like a direct correlation between interest rates going up and housing prices coming down?

Yeah. So there is a list like prevailing idea that interest rates and housing prices are perfectly correlated. And they are correlated. They definitely have a strong relationship. But a lot of what used to exist in the housing market has changed. And the way I like to think about this and the way I like to think about the housing market in general is that there are all of these competing forces and some of them push prices up and some of them push prices down. And no one of these forces is going to be the be all, catch all. You know, the one thing that dictates the housing market, that's like an overly simplistic way to look at it.

It.

And right now I would say that rising rates always do put downward pressure on the housing market. So it just makes housing less affordable. And just to explain that to everyone, when interest rates go up, your mortgage rate get more expensive. And so it is harder for you to afford the same purchase price because interest rates are more, you know, it's more monthly. Obviously the down payment is the same, but your monthly payment goes up, up. And typically in more healthy housing markets, I would say that would cause demand to drop. And again, basic supply and demand. When demand drops, prices drop. But that's not happening right now. And I think a lot of the old rules in the housing market have changed. And just to be clear, I do think there is a point in the next two, three years we will probably see flat or even negative of housing market growth or price appreciation. But I don't think we'll be that serious. And I'm still investing anyway because of all the things I did say, and I'm about to say, but I think realistically the market works in cycles and you're going to see it flatten out or decline a little bit at some point. That's just reality. So to get back to what I was saying, rising interest rates are going to put downward pressure on the housing market. At the same time, supply and demand are putting enormous upward pressure on the housing market. Two main things that we often talk about, and I Talk about on YouTube and will on this new show, is that supply is extremely constrained. And you can see just this week, Redfin released something that inventory is at an all time record low. There are less houses on the market than any time since they have existed. So that's at least 10 or 15 years, I think. And we all see this. I mean, I'm sure you guys see this in the market. There's just nothing to buy. But at the same time, demand is up. And there's a lot of reasons for that. The primary one is just demographics. Millennials, they're the largest generation now and they're reaching the peak family formation years, which means that all these people want homes, they want to buy homes, and they're having children. And so that is a very strong motivating force that I think people really underestimate is that people, you know, when they have a kid, they want a home, they want to own a home. That is like the prototypical American dream. So demand is up from that, demand is up from investors. We've seen that the average share of investors buying homes have gone up from 16 to 19%. It's not driving the market, but that's considerable. Second home demand is up. And so people still want to buy houses even though interest rates are going up. And like I said, supply is down. And so those forces are going to continue to put upward pressure on the housing market. And so the way I think about it is like, you have supply and demand pushing up, you have interest rates pushing down, and it's going to settle somewhere in the middle. And I think that's why, no matter whether you think it's going to go down in the next year or up, we're going to see a moderation of appreciation a lot. Because to date, we have seen no downward pressure. And interest rates are the first introduction of downward pressure in two or three years. And so we'll definitely see appreciation slow down in my mind. But if and when it turns flat or negative, it's really hard to time the market. And I think at the end of the day, if I could give anyone advice in this episode is don't try and time the market like 10 years from now. The housing market's going to be up. That's why I'm investing right now. And I think I explain this all not to help you try and time the market, but I explain it because I think it's helpful for people to understand the forces that are at play here because it helps you take this sort of longer term view than what's happening right now. But you could see these long term supply, demand and interest rate trends, trends all favor long term growth for the housing market.

Dave, one follow up here and you kind of touched on it a little bit already. But you said you do feel that there could be a correction in the next couple of years, right? Even if it's a moderate one. First part of the question is outside of interest rates, what other factors are you seeing that are applying some downward pressure on prices? And then second, why are you still investing even if you feel that there is that correction coming?

Great question. So I think this is tied with interest rates. And so your question was what else might put downward pressure? And I think to me the only other thing is affordability and those things go hand in hand. Interest rates are a huge factor in home affordability. But if the housing rate, I think the risk is housing prices going up too much. And I know a lot of people think that's confusing for a real estate investor to say, but like I don't want the housing market to go up that much. I would much, much, much rather see 3 to 5% appreciation because that keeps pace with wage growth, you know, in normal times, not always, but. And that's what you want to see because then normal people can afford homes, they can afford rent. And right now we're at a pace that is unsustainable. So all the things I'm saying about the housing market going up is not like me rooting for that happening. That's just what I think is going to happen. And so I do think if the housing market continues in this torrid pace, that could be serious. But I do think it's probably going to slow down. Second question was why am I still investing? And there's two reasons. One is.

I was talking to Henry Washington the other day. We were talking about the my everything else sucks theory of investing right now is that cash, like you said, Tony, is losing 7% per year. The stock market is super volatile, crypto is super volatile. Bonds are yielding 2% and that's up. And that's not even going to keep pace for inflation. And so if you want to preserve wealth, you have to look at what is out there in real estate in my mind is by far in a way the best option. It is like no doubt in my mind that it's the best option. And yes, I'm biased because I'm a real estate investor, but like I consider myself an investor first. If there was something better to invest in than real estate, I would invest in that instead. But I invest, I'm a real estate investor because it's the best investment. So I think that that's sort of what I was getting at the beginning of the show is that it's necessary to invest. Like sitting on the sidelines right now to me is not worth it. Because people say, oh, it's risky to invest in real estate, but it's risky to do nothing right now. In fact, it's worse than a risk. It is a guarantee that you're going to lose money doing nothing right now. Now I mean, who wants to do that? So to me it is worth losing the prospect of, you know, a temporary fluctuation in housing prices knowing that it's going to go up over the long term and also knowing that it is impossible to time the market. Like the housing market might go up another 10% before it goes down 5% and you'll buying right now still makes sense. And I know this is really emotional. It is for me too. You know, I say this and I come on these shows and, and talk about it because it's something I know a lot about. But like when I do a deal, I still get a little nervous. I mean I think everyone does. But the reality is when you look at the long term trends, when you look at what's happening in the really the global economy, it makes so much sense to invest in real estate. And the non emotional decision in my opinion is to continue to follow your plan and to invest for the long term. And my long term investing plan is to try and acquire rental properties.

Dave, on that note of talking about like it's risky not to invest right now, do you think a lot of people look back at 2008 and that's like the fear that they have is talking to other investors that they're gonna buy high now and then we're gonna go into a recession. What strategy would you recommend for people to kind of feel more secure and have less risk if they really think a recession is coming?

That's a great question, Ashley. And I've been calling it housing market trauma recently in some of my content because and like it is a joke, it's tongue in cheek. But I Don't want to belittle it because I'm a millennial. I graduated in 2009 and that was the worst housing market, or excuse me, it was the worst job market at that point since the Depression. I think class of 2020 might taken us over for worst job market so since then, unfortunately. But I think it's what happened then was much, much more significant of a housing market decline than we've ever seen in the United States. And I think that's really important to remember that business cycles where housing prices go flat or they even decline for a little bit for a year or two, that is normal. These are normal economic cycles. What happened in 2007 to the housing market was the equivalent of the 1929 stock stock market crash. You know, this was the big one. It was way bigger than anything that has happened. And although it's certainly not impossible that it would happen again in the future, it is unlikely that the next time there is a contraction in housing market prices that it is anywhere near the same. I did a analysis a couple of weeks ago that showed that prior to the Great Recession, the longest it had ever taken to housing prices to recover in a downturn was about two years. And the peak of the decline was somewhere around 8%. And actually in that time it went from 8% to down 4% in like four months. So it really was only about 4% down. In the Great Recession it dropped 20%. That's a real crash to me. When I look at a 4% drop, that's a normal market cycle. In my mind, a 20% drop, that's serious, especially when you're leveraged. That's like a really challenging situation. That was also coupled with a huge, huge unemployment problem. And that's what really caused the foreclosures and everything that followed after that. I actually did a recent show David Green about this and foreclosures and like for foreclosures to happen, you need that perfect storm right now if prices go down, and again, they probably will sometime in the next few years go flat or negative and who knows when. It is unlikely that we're going to see foreclosures because people have so much equity in their homes and it's likely not going to be accompanied by a huge unemployment problem. So that probably didn't actually answer your question, which is what people should do. But there's some context for you. But what people should look at in my mind is if you are conservative and you're concerned, I would look at longer term strategies. So I think either buy and hold rentals, house hacking or short term rentals. Like anything where you expect to own the house at least three to five years is probably a pretty good strategy because as I said, with the exception of the Great Recession, usually if the housing market goes down, it pops right back up in about 18 months to 36 months. And so if you hold onto your property for that amount of time, you're going to be building cash flow during that time, you're going to be paying down your loans during that time, you're going to be getting tax savings during that time and you're still going to be generating return. The loss that you're seeing is a paper loss. It's not real because you're generating other returns. But if you went to sell it, you would take a loss. But you don't have to sell it if you're cash flowing. So that's my number one tip, is just look for longer term strategies and obviously don't buy emotionally. Is just always another good tip.

Well, that was a lot of the people that got hurt in 2008 was because they were trying to sell, whether it was a flip house or a new development or even with the stock market going down, if they were getting ready to retire and they had to pull out for retirements or if they just pulled their money out of the stock market and didn't let it sit in there and hold onto it and wait. Dave, what are some resources if people want to get over that fear of 2008 and understand it more? So I know there's J. Scott Scott's book, Recession Proof Real Estate Investing. Then there's also a couple movies which I don't know how factual they are, but the big Short, I mean that really helped me kind of wrap my brain around what happened. And then also the Margin Call. Do you have any other resources that aren't like 20 page boring economics document that people can look into?

No, that's a great question. I have put out a couple videos on YouTube. You can check it out. It's called how the Housing Market Trauma. So you can look at that. We dive into some of the data. But one of the that you know, Ashley, if you want to just relax by looking at some data, Google the median home price in the United States over time. And there's a website called Fred. It's the Federal Reserve bank of St. Louis. They have great data. Just Google Fred Median home price in the US and you're just going to see a chart that goes up and to the right for all of history. There's a little bit of a blip in 2007, but if ever I'm sort of like, concerned about the housing market. I just look at that graph and it makes you realize that. That over time housing prices just go up and if you wait long enough and you're patient. Yeah. Your investments are going to work out.

Wow, Dave, like, as soon as you said that, I googled that chart and yeah, it's literally just like one very strong trajectory going up into the right. It's crazy.

Yeah, yeah, it's. It tells it all. And if in one of the videos I posted, I can't remember what it was, I sort of juxtaposed that to the stock market, which is, you know, it looks like, like someone's heartbeat. It's like a ekg. It goes up and down, like constantly. I mean, to be fair, the stock market definitely.

Generates positive returns over time, but there's a lot more volatility and ups and downs. And the housing market, at least historically, has not been nearly as volatile. It's much more steady progress over long periods of time.

And you get cash flow. Not only is it the appreciation, but you're getting paid every single month for owning it. So, yeah, I mean, obviously we're biased here. This is a real estate podcast, so if we talk to our friends at some of the finance podcasts and may have something else to say. Dave, so many good points here. I want to try and start taking some of this high level thinking and apply it in a way that our rookies can use to like, really start making some decisions. So there's all these different factors that you're looking at from like a macroeconomics kind of level. But what data points, if I'm a new investor, should I be looking at when I'm trying to maybe decide on what market to invest into or whether or not a certain property is good property. So maybe let's start with the market first. I know that's a big hangup for folks and then we can talk about the property stuff afterwards.

Yeah, this is something I've really gotten into recently because before I moved out of the country, I only invested in Colorado. And now, like I said, I'm trying to get back into the active investing game. Like the whole country. I could just choose anywhere. I have no geographic bias. And so I've been really interested in the this. And I'll say that the things that I really look at for looking for a market are pretty simple. You don't need to over complicate this, but to me, I really look for strong population growth and strong economic growth. You can measure that in a couple of different ways, but if you really want to simplify it, you know, where are people moving and to get back to like the macro level, that's where is there going to be demand? If there's more population growth, that's going to be increased demand. And in areas where there is a big and growing economic engine, you often see housing prices grow. And you know, as wages go up in those places, you'll see rents be able to go up and property prices to go up more. So those are the main things I look at. I also love to look at the diversity of employment to make sure it's not super dependent on any one sector. But that's for sort of long term rentals. I think, Tony, you're probably more qualified than I am to talk about short term rentals, but I think it's almost like in the short term rentals it might even be the opposite. Like you're really looking for vacation destination. So that advice is really about long term rentals.

So Dave, if I'm a new investor and I'm trying to kind of narrow down on a market, I know I want to look at the population, the economic growth, where am I going to find that data? Am I just like jumping on Wikipedia and like looking at the Wikipedia pages for these cities, like where is the best, easiest place to gather that data?

Well, in a couple of weeks it will be on the market is the best place to look at this data. And, and I should, I should say after that shameless plug that in addition to the podcast and YouTube channel, we are going to be putting interactive data up on the blog so you can be able to go search Orlando and we'll have rent to price ratios and all this data there. But the other thing, if you're like me and like digging into the data yourself, the website I mentioned earlier, Fred, was what it's called or the Federal Reserve of St. Louis is an aggregator of government data and I think it's extremely, extremely helpful. So you can get everything from construction permits, population growth, unemployment rates, all that in one place. So that's where I usually send people. It's pretty reliable and works really well and it's completely free.

Just one thing to add, Dave, I also want to plug BP Insights, right? Because I know that's a tool that you've helped craft as well, and we talked about it on the show before. But you can literally go into BP Insights, plug in a zip code or an address and you'll get a lot of pretty accurate data on like what market rents are. So Dave, I don't think I've shared this with you before but my first investment property, I did not use BP Insights to set the rents but I ended up renting it out for I think $1,400 per month. Month. And when I typed it into BP Insights, the market rent back out to me was 1350. So it was like almost spot on, like what we were actually charging. Right. So if you're a new investor and you're trying to get some more insights on, you know, hey, what can I charge? What does the demand look like? BP Insights is a great place to start as well.

Well, thank you. I worked on that project for years and I didn't mention it, so thank you Tony. I appreciate you bringing that back up.

Dave, I actually have a memory to share too of BP Insights is it might have been when it was first released, I think it was spring of 2020 where all of the bigger pockets pro members got this PDF file you had put together where it went through and analyzed. I think was it like 20 or 50 markets across the US and it was like here's the top cash flowing markets, here's the top markets for appreciation and I still send that document to people because there was so much valuable information in there.

Oh well, thank you. I guess I need to re release that. So we are not the tool.

I know we need an updated one.

All right, we'll do it so that we're sort of rebranding that part. Like the content part of it is going to be on the market now is going to be the new branding of that. So look for that. But the tool you're talking about, Tony, the rent, we call it the rent estimator now is still available to all pro members. Yeah. And it's honestly I feel like I'm not as involved in that anymore. It's done a great job because it's hard to keep up with what's going on with rents right now. But they've done an amazing job producing accurate estimates of rent and it's super helpful because I did say, and you know I was talking about the Fred website. You get a ton of data there. They don't have rent data and there's really not good rent data out there. And I think the rent estimate that we have on BiggerPockets is one of, if not the single best place to try and figure out what you can rent a long term rental for.

Dave, so much good information you share with us, brother. We gotta have you back on, I think on a more regular basis. There's just too many good things to talk about. We could keep going on for hours. And Ashley's so relaxed right now. For those of you that are watching.

This, I'm ready for a nap. Economic talk.

But the good kind. I'm refreshed, relaxed. Not because I'm bored.

All right, I'll record a data meditation for you, Ashley. If you ever can't sleep or something, thing you could put it on in the background.

What is it like the ASMR thing where they're like whispering into the mic, but you'll just be whispering economics data to Ashley instead?

I'll have one. I'll have one download, but I'll know it's you, Ashley.

Actually, the time that I listen to podcasts the most is when I get my eyelash extensions done and you have to like lay there for like 45 minutes and it's torture for me to just lay there with your eyes closed. Closed. So that's when I listened to economic podcasts to relax is during that time. So that would be perfect. That'd be very suiting.

Well, Dave, you know you've got a very niche market for the new podcast. Women getting their eyelash extensions done. It's gotta be a huge market, man.

So, yeah, we did all this market research and we thought that's the market we're gonna go after.

There's no competition at least, right? There's absolutely no competition.

It can be called lashes and crashes.

All right, well, if on the market is the success that we think it's going to be, we'll follow up with a spin off of lashes, then crashes.

All right, so, Dave, it's been a great conversation, man. I want to finish up with our rookie exam. Same questions we've been asking to every single guest for the past few episodes. So, Dave, are you ready for the exam?

It's been a while since I took an exam, but hopefully.

All right, question number one. What is one actionable thing Ricky should do after listening to this episode?

Go look up the data in your market. I think like Ashley, you can get a lot of comfort in seeing long term trends. So Google some of the stuff that we talked about, whether it's the median home price in the US or looking relation growth or economic growth in the areas that you are interested in. And as an analyst, I would advise you not to just look at what happened over the last month or last year. The trend is your Friend. Look at long term trends and see what is going on in your individual market.

Dave, that kind of makes me think if you are somebody that's not going to invest in real estate because you think the housing market is going to drop or whatever that reason is, if that's somebody listening right now, do what Dave said and go look at the data. Can you actually give me a reason that you're not going to invest? Instead of just saying what you think is going to happen or what you've heard has happened, do your own research and try and verify the data.

Data.

Okay, question number two. What is one tool, software, app or system in your business that you can use?

Well, I have to say that the new tool is listening to on the market and I know that's a shameless plug, but I do really believe in this. We've been working on this for a year and so I'm going to just take my opportunity to make the shameless plug because it's going to be an awesome new show and I think it really is going to help people manage and navigate all the news that's out there, all the information that's out there and help you focus on the things that are important to real estate investors.

Love that, Dave. All right, question number three. Where do you plan to be in five years? Maybe still in Amsterdam, who knows?

Yeah, I don't know. We'll probably be back in the US by then. But where I plan to be in five years is hopefully still bigger pockets. I love working at bigger pockets and I know I'm probably in the minority of listeners. I know a lot of people's goal is to become a full time real estate investor and my goal is to do that at some point. But I'm having so much fun at biggerpockets. I know you guys are a big part of the BP sphere now and I hope you would agree it's just a fun culture. It's a fun thing to be a part of and I hope to be what I'm doing. What I'm doing right now, hopefully with a bunch more units and some more passive income, but full time. I'm not trying to retire right now. I'm really enjoying what I'm doing.

Let's talk a little bit more about the real estate piece. Dave, do you have a portfolio size in mind or a cash flow target? What are your plans for the real estate side?

Yeah, I would really like to get to about $10,000 in post tax cash flow.

I know you don't hear people say that Often. That's a really good point.

Such an adolescent nerdy thing to say.

In your spreadsheets, figuring that out.

Yes, exactly. And like, I don't know, tax policy always changes up and down and stuff. But at the end of the day, yeah, I could have said.

Post tax inflation adjusted cash flow, which is probably, probably what I really want, but I'll spare you guys that. But yeah, I think that's where I'd love to get to. I think that would make me feel really comfortable. I'm one of those people who's always going to work, but that is like, if I want to be relaxing, like Ashley getting her eyelash extensions, that number would make me feel super relaxed.

Do you know what that number is with inflation and taxes?

There's no way to know, but I would think it's probably more like 20,000, you know, because taxes is probably going to cut 35, 40% and then inflation at 7%. Right now I think inflation was. Inflation will start to go down in the next year, but who knows? That's a real variable.

Wait, Dave, sorry, really quick on the inflation piece. When you say inflation will start to go down, are you saying you think the rate of inflation will slow down so we'll still see positive inflation, or are you saying that we'll see some sort of deflation happen in the near future?

Very good question. I think the rate of inflation will go down, so we'll start to see something more like 4 to 5% year over year inflation rather than 7 or 8%. And I'm not an expert in inflation, but I read a lot about this and most economists believe that the supply chain part of inflation is going to start getting worked out over the next year or so. So hopefully they're right because no one wins with inflation. It's terrible for everyone.

But Dave isn't like I'm no economist by any stretch, but deflation is also very terrible for economies. Right. You want a healthy rate of inflation, but if your currency starts to lose value, that has a lot of horrif economic implications too, right?

Absolutely. Yeah, that's a great question. Something I get a lot is the Fed sets a target of about 2% inflation for a year. And there's a very good reason for that. If people feel that prices are going to go up, they spend their money and that stimulates the economy. If you think prices are going to go down, you're just going to wait. It's like always waiting for a sale. And so people don't spend their money. And that has all sorts of negative implications because I think it's like 70% of the US economy is consumer spending, spending. And so if people are thinking like, oh, I'm not going to buy a car because next year it's going to be way cheaper, that's really bad for your economy. So honestly, so is inflation. Both are bad, but 2 to 3% of inflation, that's probably what you want to see. And I don't think we're going to get there this year, but hopefully we'll get a lot closer to that.

I'm going to take us to our rookie rock star and this is where we highlight an investor from either Facebook or Instagram. So this week's rookie rock star is Tyler Kwan. Tyler just closed on renovated duplex for 330,000 and he has the intention of house hacking it was planning on using a VA loan but ended up taking advantage of the really low rates and was able to secure a loan at 3% with a lender's credit of 7,000, which was roughly what he needed for closing costs. Putting my overall upfront investment on the deal at about $300 out of pocket. That's awesome, Tyler. So Tyler actually left some advice for something he learned and wanted to share it with rookies. Real estate works. Although I didn't knock it out of the ballpark. With this deal I will be able to live rent free, build equity, enjoy appreciation of the property hopefully and take advantage of the tax write offs. It's a win, win, win, no brainer. Congratulations Tyler. That's awesome. Well Dave, thank you so much for joining us on the show again. We always love having you on and wish you the best of luck on your new podcast. I can't wait to listen while I get my eyelashes done.

Thank you guys so much. This was a lot of fun and anytime I'm happy to join anytime you need some nerdery to relax you Ashley.

Where can everyone find out some more information about you and find the new podcast and all the other information you put out?

Yeah, great. So you can find me at onthemarket which is brought to you by Fundrise. I should mention that. So they're been an awesome launch partner with us. So you can find us at onthemarket and you can also find me if want to ask me any questions or follow up on Instagram is the best way to follow me and I am at the data deli.

Okay, awesome. Well thank you so much Dave everybody. I hope you enjoyed today's podcast. If you loved it as much as we did, please leave us a five star review on either Spotify, Apple Podcasts wherever you listen. And make sure you check out the real estate rookie YouTube channel. I'm Ashley at Wealth from Rentals and and he's Tony Onyjrobinson and we will be back on Saturday with a rookie reply.

Okay, we're gonna shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles and the wild part is it's just $12 a month. It handles rental screenings, rent collection, maintenance requirements, requests and accounting all in one platform via a mobile app or desktop. It saves me time in tenant communication and keeps me organized for tax season. It's called Rent Ready and you can sign up for a six month plan for just $1 with promo code BP2025. Pro users get it for free because we believe in it. Just sign in through your pro account to get started. RentReady helps ensure on time rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out@rentready.com BiggerPockets that's rent R E D I com BiggerPockets.