# Positive Perspectives for Residential Commercial Real Estate in 2025: Insights from Ben Miller, CEO of Fundrise
In a recent episode of the Financial Samurai podcast, host Sam Dogen engaged Ben Miller, co-founder and CEO of Fundrise, regarding his optimistic view on residential commercial real estate for 2025. Despite the ongoing challenges from high mortgage rates, Miller presented an optimistic outlook focused on several significant trends that could indicate a comeback in this sector. This article summarizes their enlightening dialogue and discusses the reasons for optimism in residential commercial real estate.
## Principal Reasons for Optimism in Residential Commercial Real Estate
### 1. **Wide Valuation Gap Between Stocks and Real Estate**
At present, stock valuations are elevated, with the S&P 500 trading around 22x forward earnings, as opposed to a historical average of 17x. Conversely, commercial real estate prices have dropped significantly by over 20% in the last two years, while stocks have increased by over 50%. This valuation discrepancy offers a compelling opportunity for investors.
Miller noted that apartment values have declined to levels seen during the global financial crisis. Nevertheless, it’s crucial to recognize that today’s economic environment is markedly different, with healthier household balance sheets. Historically, after considerable downturns, real estate markets have rebounded strongly, implying that the current situation might yield a similar recovery.
### 2. **Misalignment of Performance Correlation**
Traditionally, stocks and commercial real estate have exhibited a strong performance correlation—moving in sync as they respond to broader economic trends. This correlation has diminished since 2022, paving the way for potential mean reversion. As investors pursue more stable assets during downturns, Miller predicts that real estate could outperform stocks in the face of a recession.
### 3. **Potential Housing Shortage Ahead**
The decline in new construction, worsened by high-interest rates since 2022, presents a challenge to housing supply. For instance, new housing starts in Houston have plummeted by 97%. This prolonged pause in development is anticipated to result in a housing shortage as the surplus from the previous construction boom diminishes.
Miller forecasts that by the end of 2025, or potentially earlier, the market will adjust, leading to higher rents and increased prices for residential commercial real estate. Notably, Fundrise’s portfolio is already witnessing a revival in rent growth, a promising development in a turbulent market.
### 4. **Minimal Risk of Rising Inflation**
Concerns over inflation have escalated recently, particularly relating to political changes and potential policies that could worsen economic conditions. However, Miller indicated that historical economic data suggests robust growth doesn’t necessarily equate to high inflation. Demographic shifts, including declining birth rates and slower population growth, are also expected to exert downward pressure on inflation, reinforcing market stability.
## Long-Term Investment in Commercial Real Estate
Reflecting on Miller’s insights, Sam Dogen highlighted the importance of observing disconnects between historical performances and current valuations. For investors aiming to diversify their portfolios in 2025, he recommends considering undervalued residential commercial real estate over pricier stocks, especially in light of the recent strong performance of the S&P 500.
Dogen shared his own experience, having invested around $300,000 with Fundrise. With low investment minimums, platforms like Fundrise have made accessing commercial real estate markets more feasible for everyday investors.
## Conclusion
The discussion between Sam Dogen and Ben Miller points to a potentially bright future for residential commercial real estate in 2025, despite ongoing economic hurdles. With notable valuation disparities, evolving performance correlations, an impending housing undersupply, and stable inflation projections, investors may discover opportunities within this sector. As both Dogen and Miller propose, a thoughtful and strategic investment approach in residential commercial real estate could lead to rewarding returns in the years ahead.
To explore this topic further and listen to the complete conversation, tune into the podcast on [Apple](https://podcasts.apple.com/us/podcast/the-bull-case-for-commercial-real-estate-in-2025-and-beyond/id1324765509?i=1000684215054) or [Spotify](https://open.spotify.com/episode/1H0EJqsj9JC3QrIDyJ79Ei?si=-D6puChASQOGSg4_hH9awQ).