Kevin O'Leary Sees No End To Soaring Home Prices – 'It's A New America'

"Shark Tank" star Kevin O'Leary painted a bleak picture of the housing market during a recent Fox News interview.

The Canadian investor expressed deep pessimism about the affordability crisis, suggesting it has no easy solution.

O'Leary identifies inflation and remote work as the main drivers of the housing affordability crisis. High inflation has led the Federal Reserve to maintain higher interest rates, making mortgages more expensive.

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U.S. inflation remained elevated in June at 3.3%, exceeding the Fed's 2% target. As a result, the central bank has kept its benchmark interest rate high, with the average 30-year fixed-rate mortgage at 6.77%.

"The anticipation was that rates would come down," O'Leary said. "In fact, only 12 months ago we were thinking seven rate cuts of which none have appeared because inflation remains rampant; we're still north of 3%."

Lower housing costs in rural areas can typically balance higher loan interest rates. However, O'Leary contends that the pandemic has disrupted this traditional pattern in the housing market.

"We had this weird outcome of the pandemic where people started moving away from metropolitan areas … and the prices in those houses in rural regions went way through the roof," he told Fox News. "It's a new America. It's a digitized America, and housing is more expensive."

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O'Leary said that although real estate has been a good investment for 200 years, there's no easy solution to fix the trends. High inflation and interest rates could keep home prices elevated.

O'Leary isn't alone in this prediction. Real estate experts like Grant Cardone, who sees rents doubling, and Dave Ramsey, who cites limited housing supply, share O'Leary's view of continued price increases.

The data supports this. A Realtor.com analysis reveals a significant housing shortage, with single-family home construction lagging behind new households by 7.2 million since 2012. While high mortgage rates dampened buyer and seller activity, the lack of available homes kept prices near the previous year's level.

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While the overall housing market faces significant challenges, regional disparities are emerging. Factors like climate change and work dynamics are influencing local trends.

For example, Florida's increased risk of natural disasters has driven up property insurance costs, impacting home prices. According to Redfin, a surplus of homes on the market is also contributing to a slowdown in the state. Texas is experiencing similar pressures.

Conversely, rural areas that boomed during the pandemic as remote work hubs may now face cooling demand as companies enforce office returns. A Redfin survey indicates that 10.1% of people planning to move are doing so because of return-to-work mandates, sometimes at a financial loss.

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