Grant Cardone Says High Interest Rates Don't Move The Needle In Housing Market — Supply And Demand Do

High interest rates don't directly impact housing prices or supply. Instead, prices are determined primarily by supply and demand dynamics.

That's the assertion of real estate mogul Grant Cardone, who suggested in a May 7 post on X that the Federal Reserve and the Biden administration don't understand the laws of supply and demand. Higher interest rates impact the ability of homeowners with lower interest rates to purchase a different home.

"Prices are controlled by supply and demand, not rates," Cardone posted. "History proves that. Higher rates only ‘trap' existing homeowners with sub 4% loans from trading up to a new home."

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The median home-sale price increased from a year ago or remained the same in all 50 of the most populous U.S. metros during the four weeks ending April 28, according to a Redfin report.

The median sale price nationwide rose 4.8% to a near-record $383,188, according to Redfin. Rising prices and mortgage rates drove the median monthly house payment up 15% year over year to $2,890.

Low inventory is also driving up prices. New listings are up 15% year over year, but they're still well below the levels normally found in April. Some homeowners are reluctant to list their homes because it seems likely that interest rates will stay higher for longer and exacerbate the mortgage rate lock-in effect.

Cardone has expressed his concern over the affordability of purchasing a house in today's economic climate where mortgage rates have risen dramatically, with the average 30-year fixed-rate loan recently reaching 7.39%, according to Bankrate. The increase is part of the Federal Reserve's strategy to combat inflation.

Cardone has indicated that with the cost of purchasing a home so high, it's smarter for most people to rent than buy. High home prices and elevated mortgage rates have made the typical home nearly 37% more costly to buy than to rent per month, according to a Bankrate analysis.

Cardone has said that the traditional American dream of homeownership is more of a financial burden than a benefit, calling the required down payment "dead money" that no longer grows and that the return on investment for single-family homes is lower than for other assets.

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