Why We Are Reallocating (Away From Stocks) to Real Estate in 2025

Interest Rates

Interest rates are expected to remain high, impacting real estate investments significantly. Scott Trench predicts that the supply of rental properties will moderate, leading to high rent growth by 2026, despite stable rates in 2025 1. He emphasizes the importance of understanding the 10-year treasury yield, which influences mortgage rates, and suggests that rates will not see major fluctuations unless a significant market disruption occurs 2. Mindy Jensen adds, "The probability of a black swan seems higher than it normally is just with the way geopolitical conditions are right now."

The guessing of the interest rates so we have an opinion on it, but there's so many different ways that it could go.

--- Scott Trench

Investors are advised to focus on supply trends to better predict rent growth.

   

Economic Growth

Economic growth is expected to continue positively into 2025, with real estate emerging as a relatively undervalued asset. Scott Trench highlights that while other assets like stocks and Bitcoin have seen significant price increases, real estate prices have remained stable, making it an attractive investment 3. He anticipates that the standard of living will rise, driving demand for real estate, particularly in rentals and primary homes. Mindy Jensen agrees, noting that migration trends may not be as strong as previously thought, but the demand for rental units will remain high due to ongoing affordability issues 4.

The story of 2025, absent some catalyst I can't see, is going to be the standard of living continuing to creep up at an above average rate.

--- Scott Trench

This suggests a strong case for long-term rent growth, especially in single-family and residential rentals.