The Case for Real Estate in 2025: Why Kaufman Development is Bullish on the Future

The Case for Real Estate in 2025: Why Kaufman Development is Bullish on the Future
As we enter 2025, Kaufman Development, under the leadership of Daniel Kaufman, is more optimistic than ever about the future of real estate. In our annual update to investors, we reflect on the dynamic changes in the market and the factors that position our platform for continued success. While the past year has shown strong returns, the potential for 2025 looks even more promising, driven by a unique confluence of factors that are poised to accelerate growth in real estate and private markets overall.

2024: A Year of Stabilization and Growth
It’s no secret that the last few years have been marked by unprecedented challenges in the real estate space. But in 2024, Kaufman Development’s strategy began to pay off, with our platform showing strong returns across various investment strategies. One of the most pivotal moments was the Federal Reserve’s shift in policy, starting in September, when it began its anticipated rate-cutting cycle. The Fed reduced the benchmark rate by 1% over the course of several months, which, in turn, had a positive effect on most asset classes — real estate included.

Why 2025 Looks Even Brighter for Real Estate

Looking ahead, Kaufman Development is confident that 2025 holds significant promise for real estate. Several factors are converging to create a perfect storm for growth, and we are prepared to capitalize on them.
​
    1.    Interest Rates Will Continue to Fall

Real estate values are inherently tied to interest rates, and as rates have started to drop, values are following suit. The Fed has made it clear that they expect to continue cutting rates in the coming months, which will likely keep driving positive momentum in real estate markets. Lower rates make financing more accessible, which encourages investment and drives property values upward.

    2.    Real Estate Prices Are Still at Relative Lows
While the stock market has seen substantial growth in the past two years, real estate prices remain relatively low. In fact, current real estate prices are among the most attractive since the 2008 financial crisis. This pricing divergence between stocks and real estate is unusual, and Kaufman Development sees it as a prime opportunity to acquire undervalued properties, particularly in high-growth markets.

As value investors, our strategy focuses on buying properties when they are undervalued, especially in areas where demand is expected to rise. With real estate prices still significantly lower than historical averages, we believe this is the perfect time to make strategic acquisitions.

    3.    From Oversupply to Undersupply

In recent years, the rapid increase in construction during the pandemic, fueled by low borrowing costs and rising rents, led to an oversupply of real estate, particularly in the multifamily sector. However, as interest rates have risen, construction activity has significantly slowed down, leading to a future shortage in available housing.

With fewer new properties coming onto the market, demand is set to outpace supply, particularly in urban centers and growing suburban areas. This shift is expected to drive rent growth and increase the value of properties in the coming years.

    4.    Policy Shifts Could Provide Additional Tailwinds

While Kaufman Development typically avoids mixing politics with investing, we acknowledge that policy shifts can have a significant impact on market dynamics. With a new administration taking shape, we anticipate changes in several key areas, including:

    •    Deregulation in the financial sector
    •    Adjustments to tariffs and international trade policies
    •    Changes in immigration policies and labor availability
    •    Potential tax reductions for businesses and individuals

These changes could create a more favorable environment for real estate investment, further driving demand and reducing construction activity. This dynamic could result in even greater upward pressure on asset values.

Navigating Risk: A Long-Term Strategy for Success

As we remain optimistic about the outlook for real estate in 2025, Kaufman Development also remains mindful of the inherent risks involved. While we are confident in the positive factors at play, we never lose sight of the importance of prudent risk management. After all, there are no guarantees in investing.

The reality is that the stock market has enjoyed an extraordinary run over the past two years, producing returns that typically take a decade to achieve. However, many analysts, including those at Goldman Sachs, predict that future returns in the stock market may be far more modest, forecasting an annual return of just 3% over the next decade. In contrast, real estate has already weathered its challenges, and Kaufman Development’s assets have been positioned to benefit from the ongoing recovery.

Our strategy emphasizes long-term, diversified investments in real estate, particularly those with strong fundamentals, in well-located growth markets. We believe that buying new properties in prime locations, especially when priced below the cost to build today, is a recipe for success.

Looking Ahead

As we close out 2024 and look toward 2025, Kaufman Development is excited about the opportunities that lie ahead. With a robust pipeline of projects, a diversified portfolio, and a team committed to strategic growth, we are confident that we are positioned to deliver strong, sustainable returns for our investors.

We want to extend our deepest thanks to our investors, partners, and stakeholders for their continued trust and support. Here’s to a prosperous year ahead!

Onward to 2025!

About Kaufman Development

Kaufman Development, led by Daniel Kaufman, is a forward-thinking real estate development and investment firm with a focus on high-quality, value-driven projects. With a deep commitment to innovation and community impact,

Kaufman Development aims to create enduring value for its investors and partners. Learn more about Kaufman Development at www.dkaufmandevelopment.com and Kaufman Real Estate at www.danielkaufmanre.com.