Affordability, Mortgage Rates, and Housing Dynamics: What Investors Need to Know

In this episode of STR Data Lab, Jamie Lane, Chief Economist at AirDNA, welcomes Dave Meyer, Head of Real Estate Investing at BiggerPockets. Together, they explore real estate investment strategies, the state of the rental property market, and trends shaping the multifamily housing market in 2025.

Dave shares insights from BiggerPockets’ latest report on real estate investing, offering a deep dive into affordability, mortgage rates, and how investors can position themselves for success in today’s dynamic market. Whether you’re a seasoned investor or just getting started, this episode provides valuable guidance on navigating changing economic conditions and identifying profitable opportunities.

What You’ll Learn in This Episode

How affordability and mortgage rates are shaping the 2025 rental property market
Trends in multifamily housing market investments and where rents are headed
How institutional and small-scale investors are shifting their strategies
The rise of Build-to-Rent communities and how they impact the STR industry
Smart real estate investment strategies to identify value in today’s market

Episode Highlights

Affordability, Mortgage Rates, and Housing Market Trends

Jamie and Dave start the discussion with an overview of the housing market’s volatility over the past year. Interest rates, home values, and affordability have fluctuated, creating uncertainty for investors.

Dave explains that while mortgage rates have come down from their 2023 peak, affordability remains a significant challenge. More Americans are spending a larger portion of their income on housing, making it essential for investors to factor affordability into their decision-making.

One of the biggest questions for the real estate market in 2025 is whether housing costs will continue rising or if they will stabilize. Dave shares insights into how other economies, like those in Canada and Australia, have adapted to higher housing costs and what lessons can be applied to the U.S. market.

Rental Property Market: Where Are Rents Headed?

The conversation shifts to the rental property market, focusing on rent growth trends. Over the past few years, single-family rental prices have remained stable, while multifamily housing market rents have seen declines due to an influx of new supply.

Dave highlights key trends shaping rental investments:

Multifamily Rents: Increased supply of apartment units has led to rent stagnation, with landlords offering concessions to attract tenants.
Single-Family Rents: Despite affordability challenges, single-family rentals have remained steady, with moderate rental price increases.
2026 Outlook: Dave predicts that rent growth could accelerate again by 2026 as supply normalizes and demand catches up.

For investors, understanding these shifts is essential to determining whether single-family homes or multifamily units offer better long-term returns.

Institutional vs. Small Investors: Who’s Buying?

Jamie and Dave explore how institutional investors—such as hedge funds and Wall Street firms—are reacting to market conditions. Large-scale investors have significantly reduced their buying activity, opening up new opportunities for small investors.

During the peak of the housing boom, institutional investors were buying large volumes of homes, often outbidding smaller investors. However, with current market conditions, hedge funds are focusing on different assets, creating less competition in certain areas.

Dave notes that small, diligent investors now have an advantage in today’s market. Independent investors can negotiate better deals and achieve strong returns over time by being selective and focusing on undervalued properties.

Build-to-Rent: A Growing Investment Trend

One of the most significant trends in the rental property market is the rise of Build-to-Rent communities. Instead of selling homes, developers are constructing entire neighborhoods specifically for long-term rentals.

Dave explains that this trend is reshaping the housing market in several ways:

Increased Supply: More rental options mean greater competition for traditional landlords.
Higher-Quality Rentals: Build-to-Rent properties often feature modern designs, appealing to tenants looking for long-term leases.
Investment Potential: While large firms dominate this space, small investors can still capitalize on nearby opportunities.

For short-term rental operators, understanding the Build-to-Rent movement can help anticipate changes in supply and demand, particularly in suburban markets.

Short-Term Rentals vs. Long-Term Rentals

The discussion turns to how short-term rentals (STRs) compare to long-term rentals in today’s market. STRs offer unique advantages, including:

Higher Earning Potential: STRs often generate more revenue than traditional long-term rentals when occupancy is high.
Flexibility: Owners can adjust pricing and availability based on seasonal demand.
Value-Added Features: Unlike long-term rentals, STRs can benefit from small investments like hot tubs, game rooms, or unique amenities that significantly boost nightly rates.

Dave and Jamie highlight the importance of analyzing market conditions to determine whether STRs or long-term rentals are a better fit for an investor’s goals.

Smart Real Estate Investment Strategies for 2025

To navigate the evolving market, Dave outlines real estate investment strategies that investors should consider:

Patience and Long-Term Thinking: Unlike previous years, today’s best deals require a long-term perspective. Investors should focus on properties that will appreciate over time rather than expecting immediate gains.
Hidden Value and Property Improvements: Identifying homes with unrealized potential—such as unfinished basements, zoning flexibility, or renovation opportunities—can unlock significant value.
Understanding Local Market Trends: Investors should research infrastructure developments, public transit expansion, and new business hubs to anticipate high-growth areas.
Zoning Opportunities: Many cities are updating zoning laws to encourage more housing. Investors should look for properties that may allow for additional units or accessory dwelling units (ADUs).
Balancing Cash Flow and Appreciation: Some markets offer strong cash flow but limited long-term appreciation, while others present opportunities for value growth. Investors should tailor their strategy to their financial goals.

Actionable Takeaways

Monitor mortgage rate trends and affordability factors when evaluating investments.
Stay updated on multifamily housing market developments, particularly in high-growth cities.
Explore the rental property market for underpriced assets with long-term potential.
Consider Build-to-Rent trends and how they may impact nearby STR demand.
Use data-driven real estate investment strategies to identify high-performing markets.

Conclusion

The 2025 real estate market presents both challenges and opportunities for investors. Investors can make informed decisions that align with their long-term goals by understanding trends in affordability, rental property market dynamics, and shifts in the multifamily housing market.

Dave Meyer’s insights provide a roadmap for navigating today’s conditions, emphasizing patience, market research, and strategic investments. Whether focusing on STRs or long-term rentals, the key to success lies in adapting to economic shifts and leveraging data to make smarter investment choices.

Check out BiggerPockets’ latest report or tune in to Dave’s podcast, On the Market, to dive deeper into these insights.

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