Tailwinds to continue for the housing market?

[Danny Kaminsky]

Hey BPers,

Curious the community's take on where the market is going, since the market has been "toppy" since 2015 according to the podcast. My opinion is that there are still tailwinds for the housing market as a whole, but we will obviously see some slowdown from the craziness of this past year. I think rents will rise nationwide, probably much faster than prices, and that now is still a great time for investors to buy. Here's why:

1. Lower-bracket wages on the rise - The same minimum-wage jobs from 2019 are now demanding 12-15 dollars per hour. This will be a strong tailwind for the Class C rental market, as low-wage tenants can afford rising rental rates.

2. Inflation - I am not a macroeconomic expert, but this one seems clear at this point. There are plenty of great threads on the forum about this, but continuing to dump money into the economy will bleed over into RE prices and rental rates.

3. Interest rates likely to remain low - Interest rates will go up over the next 3-5 years, but I see no reason to believe they will go up by more than a a point or two. This will be a headwind, but perhaps not as strong as some fear.

4. Building costs to remain high - The 2008 financial crisis knocked a lot of great builders and contractors out of the business, and the supply of construction labor has not recovered nearly enough for demand. This means even if commodities go down in price as supply chains recover, building costs are unlikely to fall back to pre-pandemic levels.

5. Low used housing supply - Along the same lines of the last one, 2008 had a huge impact here. There were 4-5 years where all real estate development stopped, leaving a massive hole in terms of supply. Demand for housing at that time was still increasing, and we still haven't caught up.

I'm sure I will be corrected by those much smarter and more experienced than me, but excited to hear what you all think.