Rental Investors Become the Most Bullish in Years

Dave:Investors are optimistic and the market is starting to look better and better as we head into 2026. From improved affordability to better inventory, conditions are right for investors who are looking to grow this year. And on this episode of On the Market, I’m sharing the trends you got to understand to be able to spot opportunities in this improving market. Hello everyone and welcome to On the Market. I’m Dave Meyer. It is our first news show here in 2026, and I am happy to say that we have a lot of positivity to start the year. You know when I actually sit down to create these shows and do all the research and look at the news, I don’t approach it with some particular angle or story that I’m trying to tell. I hope you all know that I pretty regularly share when I’m skeptical or nervous about things, but as I sat down to do my research this week, I saw a lot of exciting, positive things that got me pumped as a real estate investor and I’m going to share them with you today.We’ve got three primary stories to go over. First, I’m going to talk about how real estate investors are planning for 2026. We have some new data that shows how people, just like you and me, are planning to approach 2026, where they see the big opportunities, where they see the biggest risks and challenges. And this new data provides some really valuable insights that I think everyone listening can use in their own investing and their own businesses. Next, after that, we’ll talk about the big roadblock in the market, which you probably know by now is affordability. And we have some news there that I think will surprise you and I’m excited to share. And then lastly, we’re going to talk about inventory and I’m actually going to share forecasts from a couple of experts who pretty much nailed it, like incredibly accurate forecast for 2025. I’ll share with you their predictions for inventory in 2026 and talk about what the implications are for that because as you know, the way inventory goes, so goes the housing market.So we’re going to get into that as well. Let’s do it. So first up, we’re going to talk about investor sentiment and the way that residential real estate investors, people just like you and me are planning their portfolios, what they’re worried about, what they’re excited about, the decisions that they’re going to make. And this is a new data set we have. And I’m excited to share it because I think it’s going to help you all understand how our particular community, this very specific group of people who listen to this show are thinking about investing. Because all that news that I was just talking about, it’s not necessarily wrong or bad, but unless you’re listening to BiggerPockets or some other relevant news source, it’s not really relevant to you. Zillow puts out data, but they’re talking about home buyers. So does realtors, so does Compass. All these companies, they put out great information, but the sentiment for a home buyer is different from a real estate investor.And so what we did at BiggerPockets is we decided to go out and get that data because we have a community of over three million investors. So what better place to sort of mine data and insights from than our community. We wanted to understand what are their plans, how are they planning to invest, what they’re excited about. So that’s what we did. We put out the survey just a couple of weeks ago and I’m excited to share this with you. I’ll start with the big headline. The big news is that investors are optimistic. They are very much feeling that conditions are improving for real estate investing and will continue to do so in 2026. Now you might be thinking, of course, it’s bigger pockets. It’s real estate investors. Of course, they’re excited. This is not really how it’s always been. We actually asked two questions.First we asked, how was the last year for you? How are you feeling about it? And I am a huge dork, so I made an index and quantified it and came up with a score and 100 is neutral. So if the score was 100, half the people will feel good, half the people will feel bad. And when we ask people how investing conditions have been over the last year, it was just 108. So a little bit positive, but nothing exciting. But when you ask people about how things are going to be in the coming year, the index shoots up to 1150. People are starting to see shifts, particularly in the South. I actually, I was curious. So I like broke down the results. And it seems even though everyone is super optimistic right now, people in the South are the most optimistic and are noticing shifts, which is good because the South has been struggling a little bit and we haven’t seen as much activity there.But across the board, people are feeling and seeing that conditions are getting better and it’s not just some general optimism. They are actually citing very specific reason, data, things that they’re seeing in the market. In our survey, we asked why are people optimistic if they are? And the reasons are actually broad. And to me, this is really good. The fact that people are citing multiple different market conditions that make their lives as real estate investors, their potential for new deals go up, it’s multiple things. It’s not just one thing. And that to me is pretty important because to be honest, if people were just like, “I’m excited about this next year of real estate investing because the Fed’s going to cut rates and blah, blah, blah.” If that was what people were saying, I would probably just roll my eyes and ignore it because we know that that is not really going to make conditions better as we’ve seen for the last couple of years.But investors are citing real trends that are reflected in data, not speculation for why they are more optimistic. So yes, one thing that people are looking for is mortgage rates, but with almost equal excitement, people are looking at increasing inventory and better deal flow. We’re going to talk about that more when we talk about inventory later in the episode, because this is what I am more excited about. I am seeing better inventory and deals than I have in at least two or three years, maybe even longer. People are excited about their ability to negotiate. A lot of people cited this, that they’re able to get better deals right now because sellers don’t have the same power that they have had over buyers over the last couple of years. We’re also seeing falling prices as one of the things that people are excited about, meaning that they’re able to buy better assets at better prices, which is a good reason to be excited.So what encouraged me about this is not just naive optimism. It’s actually pointing out real things that are happening in the market. And these expectations for these benefits are reasonable, in my view, given that the positive shifts, the stuff that people are talking about, it’s already starting to happen. Prices are falling. In over 50% of metros, we’ve already started to see this. Rates, I know people aren’t excited about rates. They’ve come down almost a full percentage point from where we were a year ago. If you go back to January of 2025, rates were at 7.2. Now they’re at 6.2. Now, I know that’s not great compared to where we were during the pandemic, but that’s pretty darn close to the long-term average for the 30-year fixed rate mortgage, and that makes more deals pencil. One percentage point, that changes underwriting for a lot of deals.We also see inventory up eight to 10%, and days on market are up by double digits. All of these things give me confidence that investing conditions are going to get better. And so it’s no wonder that other investors are feeling the same way, and that people who have a long-term outlook are seeing that fundamentals are shifting favorably. And for the reasons I just mentioned, it makes sense. It also makes sense because it would kind of be hard for them to get much worse than where we have bid over the last couple of years with terrible affordability and low inventory and all of that. So yes, it is getting better, but it has been a long slog to get here. Now, I mentioned that the people who are most optimistic who are people who are looking at this long term, and that makes sense to me because real estate is always a long-term game.That’s my personal opinion about it. Sure, if you’re a flipper, it’s much more short-term. But if you’re trying to build a long-term portfolio, if you’re trying to pursue financial freedom, it’s really about what the market can return you in five, 10, 15 years. It’s really not about what’s going to happen in the next two or three years. And so when you get better buying conditions, when you’re able to buy things at cheaper prices and better locations, that’s good for the long-term investor. And when we asked our community of real estate investors, what’s the best strategy for 2026? We love to debate this on the market. And James will probably always say flipping. Henry might say flipping. Kathy will probably say new development. But the bigger pockets community is resoundingly just saying long-term rentals. That’s by far the biggest. Nearly 60% of investors are saying long-term rentals, not including house hacking.So this is just buying properties and renting them out. This includes Burr, rent by the room, whether you buy it turnkey, but you buy an asset, rent it out, hold onto it. Pretty much everyone agrees. The second highest was owner-occupied, always a great strategy, and flipping came in third. Now, I want to just call out that midterm rentals and short-term rentals have become very unpopular, at least as the primary strategy. So when we look at mid-term rentals, newbies, people who haven’t even done their first deal yet or maybe have one deal, about 10% of them are interested in it. But what’s really interesting is as you get more sophisticated, people who own six to 10, 11 plus, which is kind of how we broke down the survey, there’s almost no interest in either midterm rentals and short-term rentals. It’s interesting, right? I wonder why that is.I think what happens with a lot of investors, this happened to me, is in the beginning of your investing career, you focus a lot on cash flow because you just don’t want to screw up and you’re like, “I got to maximize cashflow.” And so when you’re in that mindset, short-term rentals and mid-term rentals make sense. But once you get a couple of deals under your bet, most people realize, “You know what? I don’t need cashflow right now. What I need is to buy the best assets and just hold onto them for as long as possible.” And I don’t want the additional sort of management burden that comes with short-term and mid-term rentals. I also think that both of those markets have become very saturated over the last couple of years and are far less profitable than they used to be. And so just wanted to share that with you because do what you will.I’m sure there are still great short-term rental operators out there, great mid-term rental operators out there, but broadly in the BiggerPockets community, people think just tried and true kind of boring investing strategies are what’s going to work best in 2026. Now, of course, not everything is rosy. There are still very significant challenges in the current market and people are citing a lot of different things, but I was actually kind of surprised by the response because the options that we gave were high mortgage rates, lack of capital for new deals, difficult finding good deals, rising expenses, declining home prices, flat or falling rent prices. The number one thing that people said by a margin is rising expenses. I get it. I mean, insurance has gone up, maintenance has gone up, taxes have gone up, and this is eating into a lot of deals. And when you combine that with the flat or falling rent prices, that’s where you’re seeing margins get compressed.And so I’m not surprised to see that. And that’s something that every investor needs to be keeping an eye out. We’ve done some shows on the BiggerPockets podcast about how to control expenses, but that is something even in these improving market conditions, that’s going to be a challenge. Expenses are killing a lot of deals. And so short answer, just be really conservative in your underwriting with your expenses. Don’t look for best case scenarios. Assume your taxes are going to go up and assume your insurance premiums are going to go up. That’s the best way to protect yourself, but you got to kind of have that mindset. It’s funny to me that high mortgage rates are actually only the fourth highest answer here. So people are getting over it. And I’m glad to hear that because 6.2, 6.5, you can work with that. There are deals that work with that.So I’m glad to see that people are not being discouraged by high mortgage rates, that instead they are discouraged by the fundamentals of the deal, which is good, right? It might be hard to find good deals in this market. You’re going to have to underwrite a lot of deals before you find good ones, and there’s going to be expenses are going to kill a lot of deals. But if you have that mindset of conservative underwriting and taking what the market is giving you, you’re going to be able to find good deals. I am sure of that in this market. So I’m not trying to say everything is perfect. There are definitely challenges, but despite these challenges, investors are planning to buy and grow. And if you want to download the whole survey, it’s for free. We’ll put in the show notes, you can look at the rest of it.There’s a lot of interesting information about specifics, about different markets, different regions of the country. We have all that. You can go get that. But the last thing I’ll share with you today before we move on is that we asked people, what is your main priority for your portfolio in the next 12 months? And nearly 60% of people said to build and to grow. And I love hearing that because that’s the kind of mindset that investors should have right now. When market conditions shift, when you go from a seller’s market to a buyer’s market, that’s when it’s time to acquire. Not every deal’s going to work, but having the intention to go out and grow can really be beneficial right now. That was number one. The second one was optimize existing portfolio, another great thing to be doing in your market right now, but only 4% of people said they were selling.So I just want to keep that in mind because a lot of times I see this on social media, investors are selling, they’re getting out of the market. I just don’t think that’s true. Like maybe some hedge funds are selling some properties, but not at any scale, right? Inventory growth is actually going down right now. We’ll talk about that in a minute. But in our neck of the world, in the world of retail real estate investors, which own 90% of rentals, by the way, I know a lot of people like to say that Wall Street owns all the rentals. Actually, it’s people like you and me who own the majority of rentals. Only 4% of them are planning to sell. So even despite all the challenges, despite everything that’s going on, people are still seeing the long-term value in real estate investing and are still planning to grow here in 2026.All right. So I wanted to share that with you because I found it super encouraging. I honestly didn’t know how the survey was going to come out if people were going to be really happy, negative, down on real estate, but I’ve been feeling optimistic. I’ve been sharing that on the show over the last couple months. And it was encouraging to see that our massive community at BiggerPockets. We are the biggest group of real estate investors in the world, as far as I know. And this group is still excited about real estate and plans to make deals work in 2026, and I hope you’re one of them. We got to take a quick break, but when we come back, I’m going to share some other great news that I’ve been seeing about affordability. Stick with us.Welcome back to On The Market. I’m Dave Meyer doing our first news show here in 2026. Before the break, I shared news that we at BiggerPockets created with our new BP Pulse sentiment survey. Now let’s move on to talking about affordability. If you’re a regular listener to the show, you know that affordability is the problem with the real estate market. I have been saying this, and this has sort of been my thesis about the housing market for four years now, that where affordability goes, the housing market will go. And I’ve been saying it for three or four years. I’m sorry if you’ve been listening all that time and you’re getting bored of me saying it over and over again, but I’m sticking with it because it has been correct so far and I still believe it. And affordability just stinks right now. We just kind of have to admit that it is close to the lows that the last time we saw affordability this low was in the early 1980s, but the good news is that beneath that frustrating reality and all the headlines that you hear about affordability, affordability is improving.I know not everyone’s saying that. The news that you hear, the headlines that you’re seeing is affordability is still bad, and it is bad by historical standards, but there is a positive story. Five months in a row, affordability has improved. And to me, again, another reason to be excited and optimistic. We still have a very long way to go. Don’t get me wrong, we are not really close to what would be considered a quote unquote affordable market, but we got to bottom out somewhere, right? We talk about this with a lot of trends and data and analytics, right? It’s like it doesn’t have to turn around all at once. People expect data to move in these dramatic ways, not usually how it happens. You bottom out. A lot of people don’t even notice that you bought them out, and it just starts to creep in the other direction.And that is what we’re seeing with affordability. And sure, we don’t know if that’s going to continue, but if I had to guess, if I was to make a prediction about this, I think affordability is going to continue to improve in 2026. In real estate, affordability is a pretty specific definition, and it really is sort of this three-legged stool. It’s made up of three different things. Home prices, right? How much does it cost to buy a home? Mortgage rates, because 70 plus percent of people use mortgages to go out and buy a home, and it’s made of wages. How much are people earning? You might hear it called household income. And over the last year, all three of these things got better. Mortgage rates went down 1%. That’s a lot in a year. Mortgage rates don’t usually go down 1% in a year, so that is actually significant.Wages or household income went up one to 2% in real terms. That is above inflation. So inflation was 2.7, 2.8%. And depending on who you ask, real wages went up three and a half, four and a half percent. Let’s just call it four. And so that means that one and a half percent above inflation, meaning that your income now buys more house. You are earning more than the price of houses went up that makes it more affordable. And then third, prices were pretty darn close to flat nationationally, and they were down in some markets. In 53 of the biggest markets, according to Zillow, home prices went down. And so even though none of these things moved dramatically, we didn’t see crazy wage growth. We didn’t see crazy price declines. We saw pretty solid mortgage rates decline, but even without them moving dramatically, the combination of modest improvements leads to better affordability.That’s all it takes is these three things working together. And it’s really important that none of them are going in the other direction. All three of them are improving. That gets us better affordability. Now, I am not always right, but I do want to call out that on this show, we have been saying that this is exactly what would happen. This would be the path to affordability for like three years now. I have never been pushing the crash narrative or saying that rates were going to come down. I think if you listen to the show regularly, you know, I’ve been trying to caution people and say that I did not think there would be a crash. I did not think that mortgage rates would come down as much as a lot of people saying. But at the same time, I have been saying that affordability is a problem.Both things can be true. Affordability can be a problem without a crash. And I think that’s what the crash bros are always saying. Affordability stinks. There’s going to be a crash. Not necessarily what can happen, and as we’re seeing what will happen and is happening, is that these three pillars of affordability can slowly get better. And over time, affordability can get back to a more normal level. And that’s exactly what’s happening. And although it is modest and it is just the beginning, that is encouraging to me because this is kind of what you would hope would happen. So five months of improvement, that’s good. I wouldn’t expect that to all of a sudden make huge numbers of deals start to make sense yet, but is the beginning of a trend that will hopefully continue. Rates will hopefully come down a little more this year. There’s reason to think that they’ll at least stay close to where they are and maybe they’ll come down a little bit.I am getting, frankly, a little worried about wages and they might start getting close to the rate of inflation, but I do think if I had to guess in all probability, they will outpace inflation. And I think prices are going to be down a little bit or flat. I’ve said, I think probably negative 1% for home prices this year, which means maybe not huge gains and affordability over the course of 2026, but modest gains, and I’ll take it. I will take modest gains after the years we’ve been through horrible inventory, horrible affordability. And so seeing things get better makes sense. And again, is another reason we’re seeing, like in the sentiment and when we talk to James and Kathy and Henry and myself, that all of us are starting to feel a bit more optimistic about the prospect of real estate investing heading into 2026.So clearly I’m excited about better affordability. I think that this is what we need for a more healthy housing market for better investing conditions. For better conditions for average home buyers, just for our country, we need better home affordability, and I’m glad to see that. We have some more good news about inventory, but we got to take one more quick break. We’ll be right back.Welcome back to On the Market. I’m Dave Meyer. We’re going through our big three news stories for the start of 2026. We’ve talked about investor sentiment. We’ve talked about some surprising and exciting gains in affordability. Next, I want to talk about inventory because inventory matters a lot. We’re going to talk about some forecasts for some really reputable people that just came out about where inventory might go in 2026. And this is important. This stuff really does matter a lot because it’s going to tell us a lot about where the market goes. Between affordability and inventory, we’re going to know a lot about the direction of the housing market. If inventory goes up, that puts downward pressure on prices, right? It means that there are more sellers than buyers, and that gives buyers negotiating power, and it gives sellers less power over price. That’s downward pressure.The opposite is also true that if inventory goes down, it shifts the power to sellers and it puts upward pressure on housing prices. Now, there are a lot of different forecasts out there, and you are probably going to hear a lot of people on YouTube and social media say that inventory is going through the roof and that that’s the reason we’re going to have a crash worse than 2008 or whatever these people are talking about on a given day. But what I wanted to do was pull together what I consider credible forecasts. And I assure you, I’m not just cherry-picking ones that I agree with. I’m just picking sophisticated organizations that have real data, that have data analysts, that have economists who are professionals at this thing and take pride in their work and are not just saying things to get clicks. So I looked through a bunch of different forecasts and I found people who were right last year, right?People who were very accurate last year. This is BrightMLS, Compass, and realtor.com. They all had really good forecasts on inventory. So let’s look at what they’re saying for 2026. We’ll start with BrightMLS. This comes from Chief Economist Lisa Sturtevant, and she said that active inventory will go up about 11% in calendar year, 2026, similar to what they predicted last year. They said about 13% last year. So they’re basically saying similar year this year to last year. When you look at Compass, whose chief economist is a guy named Mike Simonson, you might recognize that name. He’s been on this show probably at least four or five times. Frequent guest, great guy, expert at inventory. He started a company called Altos Data that was, I think, maybe the first company to start real time tracking inventory. So this dude knows what he’s talking about. He is saying something similar to what Lisa Sturdivant said, 10% increase.He says, quote, “We forecast about a 10% inventory growth in 2026. In this next era, supply is finally showing signs of growth in the Northeast and Midwest while the pace of growth in the Sunbelt is moderating. Supply stays sufficient to enable home sales to grow and prevent runaway growth in home sales.” So he’s saying overall similar thing to what they’re saying at Bright MLS. We’re starting to get a consensus here, but what I think is really important, two things in here. One, we’re starting to see growth in inventory in the Northeast and Midwest. That probably means that prices are going to moderate there. Something we’ve been talking about is that I sort of said, I think we’re going to be moving towards the middle, towards flat. Instead of having markets in the Midwest growing at 8% and Austin negative 8%, I think things are going to be a little less dramatic.We’re going to see places in the Sunbelt start to come closer to zero, which is probably happening. As Mike just said, inventory growth in the Sunbelt is moderating, so that’s probably likely to happen. And all the growth in the Northwest and Midwest doesn’t mean it’s going to stop. It doesn’t mean they’re going to go negative, but it might just be a little more muted as evidenced by the inventory growth in those areas. So I think in line with some of the expectations and predictions that we’ve been making here on this show over the last couple of months. The third thing that I pulled is from realtor.com. They expect US active inventory for sale to rise about 9% in the calendar year. So all three of these are basically pretty similar. They’re all saying somewhere between eight and 11%. So pretty much a consensus among three of the more reputable groups.But even though they’re similar, there is something notable that maybe not everyone noticed here that I just want to call out. All three of these major forecasters who were spot on in 2025 are forecasting slowing inventory growth. And this is really important because all of them are saying inventory will keep growing, but the amount that it grows will go down because last year we had 10, 11, 12%, depending on who you asked, now it’s eight, nine, 10. Now, that might not sound like that significant of a change. And to most people, if you’re just shopping around for homes, you’re not going to notice that difference. You’re going to see a similar amount of growth in inventory last year to this year, but it does mean two important things. One, better terms for buyers, right? That means there are going to be better options for buyers.Even though that means prices are probably going to flatten out, I think they might even go down nationally a little bit, but this means more options for real estate investors. As I was talking about earlier, this is where the opportunity lies. You’re going to be able to find better assets, likely in better places, likely for better prices. That is the benefit of rising inventory. And we are going to see more inventory this year over last year, which means there’s just going to be better deal flow. But at the same time, no one is predicting some insane runaway increases in inventory like the crash narrative people are saying that inventory is starting to spiral out of control. And once people start selling, everyone else starts selling, that’s not happening. That’s also just not true. We are seeing that in the South, right? If that was going to happen, wouldn’t inventory in the Southeast, in these markets that are getting hit hard right now, wouldn’t that rate of growth be going up?We just talked about that it’s going down. It’s going down because sellers are logical and they don’t want to sell into a bad market. And so this is correct. This is what we want to happen. This is what we should expect to happen. In a market that is reverting to the mean is going back to what would be close to normal. You expect inventory to keep growing, but not to be growing like crazy. If it were growing like crazy, that would be a reason for concern, but there is no evidence that that is happening. So we have some consensus, and if these pretty credible forecasters get it right, we’re going to have roughly eight to 10% inventory growth in 2026. A year from now, that means, and if we’re looking at November 2019, we’re actually going to be back above inventory levels from November 2019.By the way, we’re in January, but data lags a little bit. So November’s the last month that we have data for, but that is really significant, right? We’ve not seen these numbers in six years. So I think that is encouraging. I get that sort of how you interpret that data depends on who you are. Some people might say that it’s bad because inventory is rising and prices might not grow. And that’s true. If you are just an appreciation investor, if you’re a flipper, I would understand why you would think that. But for people who are in it, long-term buy and hold investors, I actually think it means we’re back to, we’re getting closer, if this all comes true. A year from now, we might be back to a relatively normal housing market in terms of inventory. We are slowly after so many years moving back towards inventory level that I think we should want and we should expect.I got excited this week because when I look at improving inventory and improving affordability, those are good signs for the housing market. That is stuff that we have been wanting to see. We’ve been asking for for three years now, four years, and it is starting to come around. So when you hear that inventory is going up, I just want you to remember that if people are screaming, “Inventory’s going off, the market’s going to crash.” It’s getting back to 2019 levels, right?That’s what would be normal. If you hear someone comparing inventory levels in 2026 to 2022, being like, “It’s gone up 50% You should say good. That should happen. We want that. That is not an emergency. That is good for the housing market. We want inventory to come back. And people I think who are saying otherwise either don’t understand the housing market or probably trying to sell you something.Now, of course, a crash is always possible. I try and share that all the time here on this show that I try to tell you all what the most likely thing is. That doesn’t mean that a crash is impossible. I would never say that. It’s either five, 10% chance there’s maybe a crash. But it’s not because inventory is going back to 2019 levels. That on its own is not a reason for a crash. There are other things that could, like if demand just for some reason, maybe the labor market implodes or there’s a black swan event, maybe demand just implodes for some reason that could cause a crash. Or if there is forced selling, if we start to see delinquencies go up and foreclosures really start to rise and not rise the way people on social media are saying rise actually well above 2019 levels, then there could be a crash.But I’m going to say it again that as of right now, there is no evidence, there is no data that says that either of those things is happening at any sort of concerning level. If that changes, I promise you, I will be the first one to tell you. I assure you, I look at this stuff every day. I will tell you if that is happening, but as of right now, not happening, demand is actually up year over year. I should mention that. Demand is up from December 2025. It’s higher than it was in December 2024. So don’t listen to people saying that demand is evaporating, that is not true, and delinquencies right now are stable. So all in all, I think the inventory story is positive right now. I think the affordability story is positive. And hopefully you’re seeing that these are the real reasons why overall real estate investors are starting to feel more optimistic about buying conditions.They are planning to buy, they’re planning to go out and buy long-term investments, buy great assets at great prices, and I’m planning to do the same thing. But I would love to know what you’re thinking. Are you feeling optimistic, pessimistic about 2026? Let us know in the comments. Thank you so much for listening to this episode. I’m Dave Meyer, and we’ll see you next time for another episode of On the Market.