6 Predictions for 2026 That Could Reshape the Economy and Housing Market

0:00How will AI impact the economy? And what does it mean for investors in 2026? It's a massive question that may define the next few years and beyond. And today, we're diving deep.

0:16Hey, everyone, I'm Dave Meyer, housing market analyst and head of real estate investing at BiggerPockets. My guest today is Ben Miller, the CEO of Fundrise. Ben is a thought leader in the real estate and finance space, and he has a long track record of finding value and making deals work in many different investing markets. We had him on last December when he came on to the show and presented a case for real estate investing in 2025 that mostly proved correct. But since the market is always changing and we face a lot of uncertainty heading into next year, I had to bring Ben back on to share his expectations for the economy next year and how he recommends real estate investors take advantage.

0:57We talk a lot about AI and its potential impact on different parts of the economy and the housing market, including how you can leverage new tools in your own analysis and investing. Ben, welcome back to the show.

1:09Ben Miller:Yeah, thanks for having me. I am always looking forward to these conversations. You are exposed to a lot. You see a lot of different stuff in real estate and in the economy, and you always have a very unique perspective on where things are going. So maybe we can start there and have you tell us just what's your read on real estate and the housing market right now? Yeah. I think real estate's bottomed, but I've been humbled by the last half decade. We had COVID, we had interest rates, so I'm much more humbled than I was before. There are three or four really big things happening in the world today.

1:43Ben Miller:Obviously, AI, interest rates, the political environment affects the business environment a lot these days. And then the good news is that supply is going away. New supply of construction has really fallen off a cliff. So those are part of the big four things driving real estate these days. All right, great. Well, let's dig into each one of them one at a time. But before we do, When you say real estate has bottomed, do you mean that for multifamily specifically? Well, I guess all real estate is interest rate sensitive. And I think interest rates are approximately, as my point of view, obviously, it's impossible to know.

2:17Ben Miller:But yeah, I think interest rates are going to keep falling. The market doesn't believe that. The market doesn't know. There's a lot of debate about that. And I think so that would affect all real estate, including single family housing. So you think the federal funds rate will keep falling? Is that right? But you also think mortgage rates will fall as well? Yeah, I think everything will fall. I can walk you through my argument. So let's just set the stage, right? So the stage is they cut rates 3.75 to 4. The Federal Reserve doesn't want to cut anymore because they really don't know. Inflation has been stuck at about 3 % for the last 18 to 24 months.

2:54Ben Miller:And the long end of the curve, 10-year treasury, has also pretty much been stuck at the low 4s. And so what you're seeing is essentially a lot of uncertainty about the future interest rates. Some people arguing that we're going to see a reacceleration of the economy. And then some people arguing it's going to soften. And so the reacceleration of the economy would happen for two main reasons. One is that the great, beautiful bill, that big bill is going to start hitting the economy around April. And so a lot of those tax incentives will hit in 26. and there's an argument that companies will start spending and hiring as they get all these tax incentives from the bill.

3:36Ben Miller:That's one acceleration argument. The other one is obviously AI and data center build. Those are the two main arguments for why the economy will accelerate. I'm skeptical on both. I think that the economy is not doing great outside of AI, outside data centers, and that most companies, most people, if you get a big windfall from your taxes, are you going to spend it on hiring people or are you going to basically sock it away a little worried about the state of the economy? I personally think most people aren't in a risk appetite mood. It's risk off, right? Most people are risk off right now and wait and see.

4:12And although a tax boon might help some people start hiring, I don't think it fundamentally changes the outlook in a way where people are going to feel confident about making large investments. I think that on a business level and actually on an individual level as well, just like average consumers.

4:29Ben Miller:Totally. That's my view as well. And I say, you know, a year ago when they passed that bill, they didn't realize that sentiment would be so much more negative. And so maybe it would have worked a year ago, but I think it's not going to reaccelerate the economy in any material sense. April's a while away. Things could change. So it's possible. But that's not my expectation. It doesn't seem to be yours either. The other one is AI data center. Really, AI data center spend is the biggest capex or biggest dollars moving the economy. It's absolutely insane. That's wild. I think it's real. I think that it's not a bubble right now and that the amount of money, I mean, it's definitely going to keep the economy propped up.

5:08Ben Miller:But it's such a narrow part of the economy that I don't think it's enough to reaccelerate inflation outside of like transformers, electrical equipment, things that you need for data centers are going to be really inflated. But there's like limited spillover effects, the way that you have spillover effects and like housing, huge spillover effects and housing construction. If we were spending a trillion dollars more on housing construction, we'd see massive spillover effects. I just don't think that's true for AI. So what would cause things to get slower? I think that you have sort of two main things.

5:42Ben Miller:One is that generally things outside of AI are not that strong, not that hot. I mean, it's like high interest rates really did slow down the economy. Homebuilders are as strained as they've been in more than a decade. Inventories are high. Multifamily construction is off a cliff. All real estate is pretty depressed outside of AI. Wage growth is not really strong. Hiring is not very strong. So generally, the economy is pretty soft. And then on top of that, I mean, everybody knows this, but it's one of those things that people forget. So the tariffs were put in place in April. Companies did raise prices.

6:20Ben Miller:They raised prices April, May, June, July, August. And so we saw inflation stay high for longer because of tariffs. But I think we'll start to see, hey, actually, there really isn't any more inflation in the economy. I think the inflation is gone. It's just not a driver of the economy anymore. And then people will realize, oh my God, interest rates are too high. Inflation is not 3%. It's actually 2 % or low twos. And then I think everyone's going to wake up to that. And that's just going to cause interest rate sensitive things to get really, really, really valuable. I see. So my opinion is that mortgage rates wouldn't change very much in 2026 because I think until we get a line of sight of like, what's the bigger risk, inflation or recession, bond yields are kind of locked up and like people are kind of locked up.

7:10And so it sounds like you think we'll get that line of sight sometime in 2026. And your feeling is that inflation will be, maybe we don't get back down to 2%, but people will see the path down to 2 % and that we'll feel more confident that the risks, whether it's tariffs or some other risk that could create inflation will be mitigated. And then for reasons, bond yields start to come down, spreads start to come down. We start to see better buying conditions and a lot more activity in real estate.

7:45Ben Miller:Yes, completely. That's exactly what I think. And then I think if you were to sort of play that out, I think there's two main questions. One, the market's forward-looking. So it's possible we start seeing that sooner than October or November or something, like probably really, really like 100 % by November or December. But like the market probably starts to like get anticipatory like signals earlier than that. And there, you know, everybody, you know, this is at this point, like you always end up like conditioned by recent events. So everybody got conditioned by inflation, high inflation. And it's like, usually what happens is because everybody's conditioned for it, it's the least likely thing to happen.

8:26Ben Miller:That's interesting. It's like the thing we're defending against. That's my view. And then I think the question is going to be, what happens after that? What then? Now I'm going to take a really big leap. I think it goes through 2%. Really? Why? I'm curious. Because AI is deflationary. Yeah. Yeah. So please expand. Yeah. So I, okay. So let me do Fundrise. So Fundrise, we're 200 people. We have a lot of different departments. Customer service, we get 6 ,000 tickets a month. Half of them are handled by AI. Wow. Maybe more. We used to have twice as many investor relations people handling tickets as we do now.

9:07Ben Miller:We have cybersecurity, IT. We used to have eight people. Now we have five. We used to have three people doing copywriting. Now we have none. I mean, just go down the list. everywhere that AI touches, it either suppresses the number of jobs hiring or it gets rid of jobs. And then that will suppress wage growth. Yes, I agree with that. I was actually just debating this with someone on the market, our other podcast earlier, that I thought real wage growth was going to go negative next year. I just think that trend is going to continue. So basically, people are going to lose their negotiating leverage in labor negotiations, and so wages are going to go down.

9:45Ben Miller:Yeah. We can debate, and I think it's really hard to know exactly if it goes negative or exactly what happens because certain people benefit and certain people will get punished. But overall, you're replacing people with software and that's deflationary on wages. Yeah, right. Right? So you have this thing where people became more expensive and goods became cheaper. Yeah. Or services, basically. Like if you think about it. Yeah. So services are more expensive. Exactly. And so AI is the first technology that really makes services cheaper. Interesting. It's going to make people cheaper. So that's the argument for lower wage growth in general.

10:27Ben Miller:You basically have a majority of people with lower wages and then a minority of people with higher wages. Because if Dave had 10 employees and Ellie has five, is Dave making more money? Maybe because he has a lot more profit. So the average may not be lower, but like the median will be lower. Okay. All right, everyone. We got to take a quick break, but we'll be back with Ben Miller right after this. This week's bigger news is brought to you by the Fundrise Flagship Fund. Invest in private market real estate with the Fundrise Flagship Fund. Check out fundrise.com slash pockets to learn more. Do you ever notice how every passive investment somehow turns into a very active lifestyle?

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14:47Welcome back to the BiggerPockets podcast. I'm here with CEO of Fundrise, Ben Miller. Let's jump back in. That's a scary proposition, to be honest, when I think about it, just like society-wise. To me, the idea that we'll have fewer people employed and at lower wages is a big break in the economic system, is it not?

15:09Ben Miller:I think that there's a transitionary period that could be quite ugly. And I've actually sat down and done a lot of work on this. You can go on ChatGPT, go on Claw and ask these questions of like, okay, what percentage of their work can be replaced by GPT-5, GPT-6? Go through the tasks they do. And you can really quickly get to a pretty confident conclusion that it's not less than 10 % of most people's work. And in some places where you've built a customized application, like for customer service or customized accounting software for AI, it can do more than 50%, I think. Let's say 50%, maybe 90 % in some cases.

15:50Ben Miller:And so you say, okay, let's just say it's 20%. Well, 20 % of 100 million is 20 million people. It's a lot. It's huge. It's too many. Yeah. And it doesn't actually cause unemployment to go through the roof. Maybe unemployment goes to five and a half percent or six percent. Is it mostly it suppresses hiring? Well, that's kind of what's going on right now, right? We're not seeing layoffs. We're just seeing no one hiring. Yeah. I think that a generation of people who are in their early 20s are going to really get impacted. Yeah. I mean, you look at unemployment for 16 to 24 year olds right now, it's already 10%.

16:28Like that's really high. And it's hard to imagine that picking up anytime soon. That's what I mean about the societal challenges here. Like there's obviously benefits to it, but there's a lot of stuff that just feels uncertain. Another reason why going back to your previous point about people not wanting to make a lot of investments, It just feels like so uncertain about these things, how these things are going to play out. We've had chat GPT for two or three years now, but it's still so brand new. There's going to be so many different forms of AI that start to come in, not just in large language models, that could do totally different things.

17:09So I buy the idea that this could be deflationary, at least in the short to medium term. And I can't really think in my head of precedent for that in the economy, where it's been a sustained deflationary period. We've had lagging wage growth for 40 years in this country, but this seems more serious than that.

17:31Ben Miller:Yeah. I guess I'd argue the opposite of that. You've probably seen this graph, but corporate profits have been going up for like 25 years. Yeah. And if you look at the number of people it takes to produce something, it's been falling. It used to take eight people per corporate dollar, and now it takes two and it's falling to one. So technology has been making the economy more productive, need less workers, and it's been mostly gains to capital, not gains to labor. That's right. So I think this is very consistent with that. That's a good point. So there is precedent, yeah. Yeah, I think it's more similar, but more extreme.

18:09It's just more dramatic, yeah. It's basically the acceleration of a pattern we've seen.

18:14Ben Miller:Right. And it's a pattern that is both very productive, very counterproductive. counterproductive politically, but productively from a capital point of view. I'm not as bearish. I think that an optimistic view would be that AI is really designed for the young people. They're much more adaptive. So it could be that at some point, all these young people are getting hired to really be the person in the office who understands how to use AI. I'm following you. I mean, obviously no one really knows, but I think this is very plausible. This is a very plausible line of thinking here to continue sort of your thesis here about real estate in general.

18:57How do you think this impacts? Like you're saying deflationary that could lead to lower mortgage rates. I totally buy that if it is deflationary. So then like, is this kind of where the thesis about real estate bottoming comes from is like, we're going to get cheaper cost of borrowing and asset prices are going to go back up?

19:16Ben Miller:That's my expectation, my belief that, yeah, that basically the, we end up in a new era. This era is different. We go through these paradigms. You and I've been through, I don't know how many now, three or four. So we're going into a new one. And that new one it's not like the old one. COVID almost accelerated it or something. We went through, usually they're about a decade, and this one ended up being five years or something instead of being 10. And so the old one was money printing, inflation, high rates. And now we're going to go into something that's like high productivity growth, high returns of capital, lower inflation, but higher real interest rates.

19:55Ben Miller:Because what happens is we have really high GDP growth and high growth that drives the real interest rate up, but it drives inflation rate down. So it's a little bit of a, you get some and you lose some. But generally, that's good for growth in which real estate is a levered investment in growth. And so the leverage part gets cheaper and you get more growth. And so I think you're just going to see a lot of benefits. And then it's going to be more asymmetric. I think that high end does better than low end real estate. So San Francisco, New York, places that are selling to a multimillionaire. The high end is absolutely crazy how much money is going to be created for top 0.1 % of the country.

20:37Ben Miller:So a high end real estate, I think, is where you want to be. I've spent 20 years focusing on workforce real estate, real estate for middle class, because usually middle class real estate is more resilient. This is where I don't have my thinking as refined, but I think that could be impacted by this hollowing out dynamic. I haven't thought about it that way. I buy the idea, if you're right, that we'll have a lot of wealth creation at the top. That's certainly a continuation of a trend that's existed in the US for a while now. I guess I've made my own investing thesis more about affordability and trying to find places similar to what you're saying about workforce housing.

21:18trying to find places where the average person can afford the average price home. Is your move away from that thinking that affordability for the average American could get even worse than it is right now?

21:31Ben Miller:That's the political dynamic that's really quite ugly. Yeah. There's affordability in terms of goods and services, and there's affordability in terms of assets. Sure. Yes. I think assets get more expensive, but goods and services get cheaper. So it's harder to buy a house, but you can afford the healthcare. Maybe it gets cheaper for the first time. Not in the short term, but really healthcare is very impacted by AI. And so that's why I was saying if you're going to buy assets, which is real estate, you want to be in assets that benefit from the wealth effect. And we haven't shifted our real estate strategy yet around this.

22:07Ben Miller:It's still early, early days on this. But high-end San Francisco, for sure, no question. high-end New York, you probably want to be in the suburbs. I think it's like a challenge for where you want to invest. You really have to think about that. So you want to be near these big economic centers, but not actually probably in them. I'm curious, this is kind of another tangent, but like how does the average person afford rent in this scenario? You know, asset prices are going up. People are making less and less money. Like I see a lot of people talking about universal basic income. Is that kind of the avenue you go down?