BiggerPockets Real Estate Podcast - 796: 2024 Housing Market Predictions and 3 Underrated Real Estate Markets to Watch

Starting point is 00:00:00 Hey, everyone. Welcome to the Bigger Pockets Podcast. I'm your guest host today, Dave Meyer, and me and my friends from the On the Market podcast are taking over the Bigger Pockets Feed. Yeah, this is going to be very fun. So we are here taking over the bigger pockets feed to give you a little taste of what we do on the On the Market podcast where we focus on real estate, just like this show, but more on the economics, more on current market conditions. And our whole goal is to provide you, the investor, with data and information and news to make informed decisions based on what is going on in the market today. So what strategies are working best, what markets are seeing the best conditions, that type of information. Today, we're going to get into all of that. We're going to start with a recap of the first half of 2023 and talk about what's been going on in the economy and the housing market for the first six months of 2020. And then I'm going to force our panelists against their will to make predictions, even though that's very difficult about what's going to happen at the second half of the year.

Starting point is 00:01:08 And don't hold us to these predictions, but we'll, I promise we'll have a good conversation about what might happen over the rest of this year. And then we're going to go into a conversation about different markets across the U.S. If you know anything about the housing market right now, you know that certain markets are doing really well, certain ones are doing poorly. and we're going to break this down for you to help you understand which markets are going in which direction, which ones work with what kinds of strategies so that you can adapt your strategy to the right market conditions. So that's what we got for you today. It's going to be an awesome show. If you've not listened to the On the Market podcast before, we are a guest panel type of show.

Starting point is 00:01:47 So I'm joined by three co-hosts. I've got Kathy Fecky with me. Kathy, how are you? Great. Can you introduce yourself to everyone listening? Sure, it's Kathy Fedke. You probably don't know Fedke, I think means a little fatty in German, but anyway. I did not know that. How have we done 100 shows together? You've just told me that for the first time. You just have to know German, I guess. You just dropping bombs like this right out of the game. Right there. All right. Well, now everyone's going to remember you.

Starting point is 00:02:15 Yeah, never forget that name. And I am a co-founder of Real Wealth, where we've been helping investors buy investment property nationwide for almost, well, actually 20 years. This is our 20-year anniversary. And, of course, I'm a Bigger Pockets, huge fan. And God, it's just super happy to be here. Nice. We also got James Dainer. James. How are you?

Starting point is 00:02:37 I'm doing good. I'm excited to be back on the Bigger Pockets main channel. And for people who haven't listened to the episodes you've been on so far, tell us a little bit about your investing experience. So I'm a full-time investor out of Seattle, Washington. We've been investing since 2005, very active fix-and-flip operators, developers, multifamily buyers, we are backyard investors in Seattle, very active, addicted to the deal guys, deal junkies up there.

Starting point is 00:03:04 Awesome. Well, thanks for joining us. And then Henry, I know you're on this show a lot, but we also got Henry Washington. Can you give us a little intro? What up, guys? Yes, I'm Henry Washington, and Henry actually is German for large fatty. I didn't know that. I didn't know that either.

Starting point is 00:03:24 Wow. Yeah, just magic. Yeah, I'm a real estate investor. I'm based out in northwest Arkansas. I've been doing this since about 2017, got about 100 rental properties. We focused mainly on single families and small multifamily. All right.

Starting point is 00:03:39 Well, thanks for joining us. And my name's Dave Meyer. I host this show with David as a guest host every once in a while. But if you don't know me, I work full time at Bigger Pockets. I'm the vice president of data and analytics. I also host the On the Market Show with these fine people. And I've also been investing in real estate for 13 years or so.

Starting point is 00:03:57 For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

Starting point is 00:04:14 That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion dollar portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes.

Starting point is 00:04:48 Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution.

Starting point is 00:05:27 That means you can not only find motivated sellers, but you can also reach out right away. SkipTrace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comps that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M dot com slash BP.

Starting point is 00:05:58 Don't just dream about real estate. Make it happen with PropStream. Most investors spend all their time talking about their high-level returns. But that's not the number that actually matters. What actually matters is what you keep after taxes. And that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag.

Starting point is 00:06:23 Bam Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long-term approach. This isn't about chasing hype or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash bam. So first up for the show today, we're going to recap what's been going on in the housing market for the first half of the year. And to me, the biggest story is that housing prices have corrected a bit, but despite a lot of news and media attention to a potential crash, they have

Starting point is 00:06:57 definitely not crashed. It depends on who you ask. There's a lot of different data sources. You know, you can look at the Kay Schiller or Redfin or Zillow, but most of them agree that housing prices are down year over year somewhere between one and three percent. We were all talking earlier and saw that the median home price in the U.S. dropped from 449,000 to 441,000. So it hasn't been a huge adjustment. And honestly, this is a bit of surprise to some people who thought with rising interest rates, we would see a big correction or potentially even a crash. I'm curious, Henry, what are you seeing in your market? Are you seeing this correction-type environment or something else? Yeah, Dave, I'm actually seeing the exact opposite. When I look at housing

Starting point is 00:07:42 prices over the last six months in northwest Arkansas, we've actually been seeing an increase to the tune of $10,000 to $15,000 monthly. And so the opposite is true here. Yeah, that's super interesting. Why do you think that's going on? Is there anything particular about your market that you think is unique? Yeah, I think one of the most unique things about my market is the corporations that are here. So the economy is based around about three or four major corporations who happen to be pretty recession-proof corporations, and they're actually butts and seats corporations as well. So they're requiring everybody who works for the company to relocate back to the area. And so there has been this trickle of people moving back here,

Starting point is 00:08:27 plus they're continuing to hire through this. So we've got new people moving, and that is increasing demand. And that demand is really increasing in that mid-tier home to that luxury home price because you have high, you have high salaried individuals who are coming and they don't want to start her home. They want something a little nicer. I think, you know, I'm sure you're seeing this in your market, Henry, but to me, the major reason that we're not seeing housing prices crash and they're more in a correction mode is because of low inventory. We talk about this a lot, but there's just not a lot of markets for, you know, there's not a lot of homes for sale. We actually saw the most recent data in May say that inventory was actually down, which is the opposite of

Starting point is 00:09:13 what normally happens. Usually when interest rates go up, there are less buyers and there's more houses just sitting on the market, so there's higher inventory. But we're seeing the opposite of what normally happens. Kathy, do you have any thoughts on why that might be? So many thoughts. Lamb on us. It's really shocking to a lot of people who thought that inventory would absolutely spike when interest rates went up last year. But when you really look at the bigger picture and go back, say, almost 18 years to 2005, there was about 4 million homes on the market. Fast forward to 2015, about 1.2 million. It's been on a decline for a really long time. But in 2020, wow, inventory just tanked. Obviously, people weren't excited about putting their homes on the market

Starting point is 00:10:00 during a pandemic, but then it really hit bottom in 2022. Oh my goodness, it was 240,000 homes in inventory, and that is an all-time low. Now, we've gone up since then, once rates went up, inventory levels have gone up as well, but still historically low. And what we just saw towards the end of June was that active, again, context is everything, because numbers don't mean too much unless you know what to compare it to. And in 2022, active listings grew by 30,000 at the end of June. In 2023, this is just last week, active listings grew by only 5,848. So why, you know, what is going on? It has so much to do with the lock-in effect when interest rates are now close to 7%, at least while we're recording this show. That keeps people in their homes. But markets move when

Starting point is 00:10:59 people exchange things, right, when people sell and buy and all that. But if you have a huge group of people who just are not willing to sell, because they're not going to find another house that makes sense at 7% when they're in a 2, 3, or 4% rate and probably a much lower price, because many people bought homes a while ago, not just last year. So when there's people not selling, that's also people not buying because people who sell usually buy. You know, they still need a place to live. So it's just locked. It's just the housing market is locked. And if interest rates come down, we'll see that loosen up. But in the meantime, we're not there yet. Yeah, it's been, I think, probably the biggest thing that's impacting the housing market right now is just this low inventory

Starting point is 00:11:43 that no one seems to want to sell. And that is sort of creating, it seems like we're getting back to the point where we were last year where there is a lot of competition for homes. Like you were, I was expecting things to be sitting on the market at this time of the year. But I just saw something that days on market, which is a really good measure of the balance between supply and demand, had been going back up, like sort of as you would expect, given these economic conditions. But then they peaked at 27 days, which may sound like a lot, but would be low during a normal time and have come back down to 14 days. That means the average house right now, even with higher interest rates, across the whole country, is sitting on the market for just two weeks.

Starting point is 00:12:27 which is incredibly low in historical context. James, I'm curious, are you seeing these levels of competition? Because if you don't know, James invest in Seattle, which has seen one of the bigger corrections in the country, relatively speaking. I'm curious if you're also seeing sort of an upticking competition. Yeah, I mean, 12 months ago, it was looking pretty hairy. The market was dropping rapidly. We saw like a 15 to 20 percent drop off peak.

Starting point is 00:12:53 And days on market skyrocketed from under, to it went up to 42 days in January. And what we've seen is this in the last six months or last seven months, days on market have dropped down to eight days in the Seattle market. And that's a huge change in turnaround. And we are definitely seeing it. We're selling, you know, we sold almost every property that we are listing right now.

Starting point is 00:13:19 We are selling in the first five days. And unless it's in that really upper echelon pricing and the consumption rates there, the buyers are there. And to Kathy's point, I didn't think the lock-in effect was going to be that impactful, but it is a real thing. There is nothing for sale. And the stuff, honestly, if it's remodeled product, I think the day, days on market would be even less than eight days. It's like this weird junk in the market that's actually bringing that eight days up. It's all the way up to eight days. Yeah, it's outrageous, right? But I mean, there's not enough product for people to buy. that is the underlying factor right now.

Starting point is 00:13:55 But we are definitely seeing a turnaround in our Seattle market. So there you have it. I think those are, you know, some of the major stories for the first half of the year in the housing market. Prices are coming down a little bit year over year, but they have not crashed. Inventory is incredibly low, which is contributing to why prices are doing what they're doing. And competition is heating back up. On sort of a macroeconomic level, I'll just say that obviously you're probably aware of this,

Starting point is 00:14:20 but interest rates, the Federal Reserve, had hiked rates three different times. We're now at a federal funds rate above 5%. And that has pushed mortgage rates up as of this recording, like Kathy said, to the low sevens. And as of right now, the economy is still growing. We only have GDP numbers back from Q1, but it did grow 1.1%, which is not super exciting growth, but it did grow. And there's something actually called GDP Now, which helps you estimate what GDP is in real time and it's predicting 1.9% for Q2. So we are expecting to not be in a recession at least

Starting point is 00:14:57 at this point of the year. So now that we've recapped what's going on, it's time for you guys to do some predictions. It's our prediction addiction game because everyone loves listening to people make predictions. And we're going to see how good you all are at it. Our first question is mortgage rates. We're sitting. right around 7% here in the beginning of July. Where will they be by the end of 2023? Think about the new year and we're heading into 2024. Where are mortgage rates going to be?

Starting point is 00:15:33 James, start with you. You know, I think they're going to end about 6.5% which is higher than I thought at the beginning of year. Okay. I'm not seeing the rate slide as much as I thought they would be at today. All right. Kathy. I am swinging out there with 5.9%.

Starting point is 00:15:47 Maybe it's wishful thinking, but we have seen inflation. trend down. And I think by the end of the year, it will be trending much further down. Fingers crossed. All right. And I like your optimism. Henry? Yeah, I am not as optimistic. Not because that's what the data is saying, just because the Fed has said they're going to continue to raise rates until inflation gets under control. They have indicated that they might do two more rate hikes. And I'm going to take them seriously because they've done everything they said they were going to that's far. So I'm at 775. 75. 7.3 quarters. I'm with Henry. I'm in the higher for longer camp now. They've said they're going to keep them higher for longer and I don't have any reason to believe

Starting point is 00:16:30 them. So I think it's going to be mine's, I'm saying 7.5. So Henry and I are close here. But we'll have to steal this show again at the end of the year and see who's right. Okay. So we got a pretty widespread there. That was more, there was, there was, there was more variance between the four of us than I thought there was going to be. All right. How about year over year housing prices? Just as a recap, right now we are at about negative one, somewhere between negative one and negative three, depending on who you ask, year over year housing prices. Henry, start with you. What do you think? My gut tells me I think we're going to continue on the same path. So I think we're going to stay flat, maybe come down 1% if that I don't think it's going to come down much at all.

Starting point is 00:17:13 All right. Kathy, are you going to be optimist again? I am. I do actually think that we're going to a year over your prices increase, but ever so slightly. I'm going to just go with 1% for fun, but I actually think it'll be higher than that. If indeed my prediction of mortgage rates comes down, then we would see more people coming in the market and bidding. They're already bidding right now. There's bidding wars again, guys. It's crazy. Even at 7% rates. James, what do you think? I actually think we're going to have some with the trends that are going on right now. And I mean, the fact that we're having multiple offers with a 7% rate, and if rates do come down six and a half like I think.

Starting point is 00:17:49 I'm actually predicting about 5% growth. Wow. Okay. You think we're going to stay on this trajectory. Okay. This is a bizarre world to me, but I'm just going to go with the bizarre. Well, I was thinking earlier today that I was going to revise my forecast. But about a year ago, like in September 2020, I said I thought in 2023, the housing

Starting point is 00:18:08 market would go down three to eight percent. And I'm just going to stick with it. There's so much confusing data. I'm just going to stick to my guns and say, I still think the housing market is going decline slightly on a national level by the end of the year. All right, for our last prediction, it is GDP growth. If you guys don't know what this means, it's just gross domestic product. That is basically the aggregate sum of all of the economic production of the entire country. And you want it to go up normally. And if it's down for two consecutive quarters, that is what many

Starting point is 00:18:43 people believe to be a recession. So I'm curious because I want to know if you think we're going to be in a recession, basically, where you think GDP growth will be. Kathy, the optimist, what do you got? Well, I think the first quarter was like 2% or something. It was very shocking that the economy was growing in spite of all the efforts of the Fed to kill it. So I'm going with 1.2% as an annual, you know, as the GDP of the year of 2023. So I think it'll be no recession, in other words.

Starting point is 00:19:12 Okay. And I just want to clarify that when we're talking about GDP, I'm talking about quote unquote, real GDP, which accounts for inflation. So we are saying that the economy will grow even in excess of the inflation that's going on. Henry, what do you got? I'm similar to Kathy. Again, and similar in my last. I think we're going to be flat or up about 1%. If you look at the factors feeding into GDP, you've got the jobs report came out. That looks great as far as there's more jobs available. The consumers are comfortable and are spending money. And I just think that that is saying that the economy is strong and it'll go up a little bit.

Starting point is 00:19:54 James? You're going to dissent? You know what? I'm actually in the herd on this one. I think there's no recession but minimum growth at 1%. I just, I think people are still consuming right now. It is slowing down. You know, I just think people have a tough time turning off the faucet right now.

Starting point is 00:20:09 They all turn on the faucet during COVID. It's like, I'm going to buy everything. And then, you know, a smart guy told me one time, he's like, don't ever turn it. turn that faucet on because it's really hard to turn it off. Keep control of your expenses. And I feel like America's having a problem turning it off right now. I love how James is telling us not to turn the faucet on while he's recording on his yacht. And that is literally what he's doing.

Starting point is 00:20:30 That is not an exaggeration. He's literally sitting on his yacht telling us not to turn the faucet on. You know, last yacht, I turned a profit on, Dave. Okay. After three years, I sold it for more than I bought it for. So I will flip anything. Nice. Well, I'm with you guys. I think, you know, I think it's a little early to say there won't be a recession, but I think if it's going to happen, it's probably not going to happen in 2023. We had a pretty famous economist named Mark Zandi on the on the market show a couple of months ago. And he coined this term the slow session where it's basically like we never actually see that negative GDP growth, but it's like this anemic really slow growth that we're technically not in a recession. session, but like a lot of people, some people at least will be feeling like we are in a recession. And as of

Starting point is 00:21:23 right now, it does sort of feel like that. So, so I'm sticking with that. All right. So those are predictions. Please don't hold us to them. These are for entertainment purposes only. No, I do think it's really helpful to just at least talk through why we think these different things are going to happen. Obviously, we're all just making our most informed educated guesses. And we'll just have to see what happens in this very confusing economy. I mean, educated guesses, but the jobs report was 497,000 new jobs, double what was expected. Doesn't sound like a recession. Yeah, it's wild. Like, if there's going to be a job loss recession, like, it's going to be a while. Like, we're seeing it go in the opposite direction. It would take, in my mind, quite a while for the unemployment rate to get up to,

Starting point is 00:22:08 you know, even 4% at this point. It's going to take at least several months. And 4% is still relatively low unemployment. Yeah. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund.

Starting point is 00:22:36 Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought-after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical

Starting point is 00:23:06 returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. This and other information can be found in the fund's prospectus at Fundrise.com slash flagship. This is a paid advertisement. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore.

Starting point is 00:23:24 You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away.

Starting point is 00:23:51 SkipTrace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M.

Starting point is 00:24:16 Don't just dream about real estate. Make it happen with PropStream. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multi-family real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues. Bam Capital builds its investment with that reality in mind. They are focused on solid operators, tax efficiency, and long-term performance.

Starting point is 00:24:48 For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more at biggerpockets.com slash bam. All right, we're going to move on to our next part of the show where we're going to be discussing different markets. So in preparation for this, I, did some analysis over the last few days to just sort of help everyone understand what is going on in the housing market. Because the stuff we were talking about earlier is all national level statistics. These are aggregations about what's going on with days on market inventory. But the reality on the ground is very different depending on what market you're in. So I looked at the top 137 markets,

Starting point is 00:25:34 just because those were the ones I felt had like enough data for us to make some. inferences about it and 41% of them declined over the last year and 59% went up. So there's like a real break in the country right now where it's not exactly 50, 50, but you know, there's a sizable portion that are going in one direction and a sizable portion that are going in the other direction. And the spread between them is is honestly crazy. So the worst performing market over the last year. I'll actually give you guys a guess. Anyone got a guess last worst, single worst over the last year? San Francisco. Boise. Henry? Yeah, yeah. It's either, it's either, I would say Boise or, I mean, Seattle's been rebounding,

Starting point is 00:26:22 but that would have been my guess. All right. Boise was second worst of the top 137 largest. Austin, Texas was the worst with 15% decline in sale price in Austin, which is very significant. Boise was the second worst with 14% and Oakland came in there. But San Francisco, Sacramento, Phoenix, Vegas, those are all up there. A lot of West Coast cities. And Seattle came off. We were like number five for a second. Yeah, Seattle is doing a little bit better now, but it's still definitely, yeah, Denver's moved up a little bit.

Starting point is 00:26:55 But they're still not doing the best. They're still negative. But on the other side of the equation, we have Fayetteville, North Carolina is up 16%. Wow. So the spread between the worst and the best market is 30% right now. This is why it's so important to understand what's going on in your local market and listen to shows like on the market where we tell you all about this kind of stuff. So because of this spread and we have this like really dramatic difference between markets, I asked each of our panelists to give us an under the radar market that they want to share with the rest of you. And so we all know what's going on.

Starting point is 00:27:33 I mean, a lot of us know, like, it was pretty easy for them to guess what's going on in big cities like Austin. And a lot of the pandemic darlings like Boise and Reno are sort of having the big retractions, whereas a lot of the southeast is sort of known to be going up right now. But we want to provide you with markets that you don't know about. Maybe you've never even heard of these places that you can look into for your own investing. Or it's also useful to just go look at what. What are some of the underlying factors that are driving the behavior and the conditions in this market and see if they relate to the places that you invest? Because that could really help you understand what direction your market might be going. So, Kathy, I'm going to start with you.

Starting point is 00:28:20 What market are you bringing to us? There's no chance anyone's heard about this market. Very much doubt it. Are you ready? Thackerville, Oklahoma. What? is my yes. Is that a place?

Starting point is 00:28:35 No offense to anyone from Thackerville, but I've never heard of that city. Is it a city? A town? It is just over the border from Texas. So much growth is spreading out north of Dallas. The core is getting expensive. DFW is getting expensive. So businesses are moving out.

Starting point is 00:28:56 And so are people to more affordable places. and one of the areas that has grown so much is Gainesville, Texas, where home prices were actually up 10% year over year. Median prices, 305,000. And Thackerville is just over the border, 12 miles. So a lot of people will live in Oklahoma and commute to their jobs in Texas because in Oklahoma, the property taxes are much lower. They're 0.85 versus double, triple, or even quadruple that. if you just go over the border into Texas. And home prices are lower.

Starting point is 00:29:34 The problem is there's no inventory. There's hardly anything there. I think there's 16 homes on the market. So we're actually starting a build-to-rent fund there and building some new supply just over the border in Oklahoma to capture those lower prices, lower building costs, lower taxes and yet rents are pretty high because it's Texas money going there. So anyway, that's my little high. I for 20 years, 25 years now, have been searching where the puck is going, so to speak.

Starting point is 00:30:07 Once you've already heard about an area that's growing, it's probably too late. So I just like to see where the jobs are going, where population is growing, and get right outside of that, right in front of the path of progress is my favorite. So that's a great lesson, Kathy, and just for everyone listening, why did you pick this particular town, first of all? And of all the places where Dallas can expand, right? It's, you know, Texas is a pretty big place. Like, why this direction, what about it do you think is so compelling?

Starting point is 00:30:38 Well, Dallas is growing in all directions. So, and like many places, the urban core has become very expensive. And it's become, there's higher regulation. Whereas when you get out into the suburbs, you know, you can get more work done and your employees can live cheaper so businesses move there. But that particular area, we've just seen so much growth with businesses moving north that we think that the next frontier is just over the border in Oklahoma. So that's why there's also a casino, WinStar Casino with 3,500 employees. And those employees have no place to live.

Starting point is 00:31:14 So they're actually living in Texas. If there's housing near them, they're going to be stoked about that and I'll have to make that commute and it'll be cheaper. You also have distribution centers for Walmart, Liberty Energy, lows. It's, again, lots of growth, lots of space to grow and for companies to come in and, you know, be able to have a cheap headquarters or industrial space or warehouse space and still have a massive metro nearby. I like it. I mean, I think I, Henry, I think I owe you an apology because I used to think that where you invest is obscure. but Backer Mill, Oklahoma might beat you on the obscurity index there. But that's what we asked for.

Starting point is 00:31:59 So, Kathy, A-plus on the assignment. This was great. Well, with that, let's move on to Henry. Tell us about what under the radar market you want to talk about. Yeah, I mean, obviously, guys, you know, I'm going to talk about my backyard. I do. I invest here. I'm talking about Northwest Arkansas.

Starting point is 00:32:14 So this is a small, I call it a little bubble up here in the Northwest. corner of Arkansas. So we're about three and a half hours northwest of Little Rock. So we're sitting right on the border of Missouri and Oklahoma. And this area, for several reasons, makes it a phenomenal real estate market. So to talk about some of the economics, we have very large corporations here, recession-proof corporations like Tyson Foods, J.B. Hunt, transportation, and then Walmart all headquartered right here in northwest Arkansas. And so these are companies that are going to do well if we do go into a recession. You always need a, you need Walmart is the place people shop when money gets tight.

Starting point is 00:32:57 And you have to get stuff to places. So transportation is always going to be a thing. And everybody eats chicken, right? So you've got just these recession-proof companies. But the key there is these companies are butts and seeds companies. They want people living in the community where these companies are headquartered. And so people have been moving here at a crazy alarming rate. I think the last statistic I saw was about 35 to 38 people per day,

Starting point is 00:33:26 move to Northwest Arkansas. And so what that does from a real estate perspective is it creates the things that you want as an investor. You get cash flow and depreciation, right? You get cash flow because we're still Arkansas. So you can buy on the lower end of the housing price scale. But you can rent on the higher end because you've got people who have, large salaries that are moving here. Some don't want to buy a home here so they're renting. And so rent prices are high. You can buy low and then inventory is so low. So if you're going to turn properties or flip properties, you're able to capture pretty good profits doing that. We're getting multiple offers. But to give you some of the numbers from the real estate perspective, we have about 1,500 homes on the market right now. We would need to be at about 5,000 homes and 5,000 active listings for our market to be considered a buyer. market. The average days on market seems high at 94 days, but we would need to be at 120 days,

Starting point is 00:34:26 but if you look at the median days on market, the median days on market is 56. So that means between when a house is listed and then when it goes under contract, it's typically about 21 days. And so it's pretty quick. Now, things that are rehabbed and are rehabbed well are trading a lot faster, things that are crap are trading a little slower, but that's just a sign of a healthy market. that's what should be happening. Our rent vacancy across northwest Arkansas, 1.5%. So there's demand for anything that's available to live in. If you have a rental and it looks halfway decent,

Starting point is 00:35:02 somebody's going to be living in it. And we're at about, for an apartment, average rent is $1,000, but that's an apartment. If you're looking at single family homes or duplexes and things like that, average rent somewhere between $12 and $1,500. So it is a, you know, I call it a real estate, state investing unicorn. There's just there's great economics. There's affordability. You get

Starting point is 00:35:24 appreciation. You get cash flow. And I and we have just been seeing an increase in buyers entering the market and increase in days on market. Or decrease in days on market. It's just been it's not done what a lot of these markets seem to be doing across the country. Wow. It's it's unbelievable. Every time you every time you talk about it, I want to fly over there and check it out for myself. All right, let's move on to James. What market are you bringing? You can't say Seattle, because that is definitely not under the radar. I'm so impressed with Kathy's pick, though, because I just, the population is 440 people in this. I was like, I like her approach, though, because it's like, oh, the population grew by 20%. It's like, okay, it's got upside in here.

Starting point is 00:36:14 One family moved in 20% in three. Yeah. So I actually picked a place and it kind of caught me off guard when I was researching this was Green Bay, Wisconsin. Title Town. Yeah. The reason I pick Green Bay is because it was ranked on numerous places, the number one best place to live in the U.S. And that's what they're predicting the next year. And one thing that I've kind of realized the pandemic has changed everybody's mindset so much is they just want to live where they want to live.

Starting point is 00:36:44 be comfortable. And what it kind of did is it took Americans off this grind mentality that we had before, where it was like, go, go, go, go, go. And people have realized they just want to live in a nice place that's affordable. And so I do think that's a big factor in my decision. Right now, the median home prices are still up 9% year over year. So it's constantly growing. The average home sells for 5 to 11% over list right now. Wow. And the 11% is more like those hot homes that are renovated, and the ones that are more kind of duds are still selling for 5% over the list. The sale of the list is at 105% right now.

Starting point is 00:37:25 I like the affordability of the market. One thing I've learned is, you know, when rate started skyrocketing, I actually thought the more affordable markets were going to have more issues because it's going to really affect the bottom line. But it's been doing the opposite for the last six months, and the median home price is 240,000. And so it's a cheap performance.

Starting point is 00:37:44 It's a great place to live besides the weather. That's why it caught me off guard. That cold, cold weather would be my only hang back. And one sneaker stat is it's a huge cheese industry, and the average price of cheese is 32% higher on a five-year average. So the cheese... Did you just go and look up cheese futures or something? I did, because I was struggling to find the economy in there. I was like, well, I know they like cheese, and I know they produce a lot cheese. And I do think we're in this shift of globalization slowing down and we're going to be buying a lot of stuff. And hopefully we're buying a lot more American-made products. And that's what the trend could be. And cheese could be a factor in that. But I mean, I'm coming back to it. It's

Starting point is 00:38:29 affordable. It's a quality place to live. And I do think some of these metro cities, Milwaukee, Chicago, the livability has kind of dropped a little bit. And people just want a simpler, easier lifestyle. And there's a lot of migration from those two metro cities going up that way. And we've seen that across the board in all these markets is like the metro cities, people are kind of getting a little bit away from them right now. It's almost kind of like the 80s where people are starting to leave the metro and they want to be more in the suburbs. They want peaceful living. And that's kind of what I'm based on my prediction on that. But it's currently growing. It's growing in number one livable place to live except for me because I want no seasons. I like sun only.

Starting point is 00:39:06 Yeah. Well, I think we've hit the peak of this show now that we're talking about cheese pricing on it. I'm very pleased this is how this is evolved. Well, it is great. And James, I do want to call this out because I agree in sort of one of my investing theses is that affordable cities are really going to pave the way for the next couple of years. But I think it's important because people ask me all the time, they're like, oh, this so-and-so city, it's really affordable. You can't just buy anything just because it's affordable. Like there has to be a draw to that area.

Starting point is 00:39:38 So like when Henry's saying it's affordable, but there's a. a huge economic engine. James is saying, yeah, maybe cheese prices are going up, but also that it's a really high quality of life place to live that's going to attract people. So I do think there is some logic that affordability is going to drive some future housing market trends, but obviously you need to make sure whether it's economic, quality of life, whether taxes, you know, something that is going to draw people to the city because at the end of the day, it all comes down to supply and demand. And you need to be able to measure where. demand is coming from. Well, remember, Thackerville has a casino. Okay, Thackerville, it is. I feel like

Starting point is 00:40:18 we should go on like a road show and go to all these places. I want to see Thackerville. We'll double the population. Well, just let the four of us show up. Well, thank you all for bringing these under the radar markets, some of them, Kathy, a little bit more under the radar than other. But this is really helpful and hopefully it's helpful to all of you in trying to understand how you can find your own markets. You don't obviously need to invest in these three markets. But I think the logic and reasoning and research you did is really applicable to really anyone who wants to to invest in real estate. That is our show. I do want to thank David Green and Rob for allowing us to take over the show. Hopefully you like this. If you do pop over to the On the Market

Starting point is 00:40:58 podcast, you can just find it on Apple or Spotify or wherever you listen to podcasts. We come out every week on both Mondays and Fridays and bring this type of data news focused information for real estate investors. So come check us out there. If you want to connect with the fine investors and hosts on this show, I will help you do that. Henry, where can people connect with you? Yeah, Dave, thanks. The best place to catch me is on Instagram. I'm at the Henry Washington on Instagram. Also the same on threads now, because that's a thing. So check me out on Instagram or threads that you can check out my website at Henry Washington.com. James, where can people connect with you?

Starting point is 00:41:37 Best way to connect with me is probably on Instagram at J.DaneFlips or Jamesdaenard.com. And I just found out about threads. So I'll try to figure that whole thing out. So James will be on it in two or three years, given his pace of technological adoption. That's about right. Okay. And Kathy, what about you? You can find me at realwealth.com or Instagram, Kathy Fedke.

Starting point is 00:42:00 And remember what that means. And I am at the data deli on Instagram. or you can always find me on BiggerPockets. Thank you so much for listening. Hopefully, we'll see you next time on the On the Market feed. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday.

Starting point is 00:42:46 I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calicoe content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results.

Starting point is 00:43:15 Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.

BiggerPockets Real Estate Podcast - 796: 2024 Housing Market Predictions and 3 Underrated Real Estate Markets to Watch

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.