Real estate investor Grant Cardone has said the U.S. Federal Reserve has “single-handedly” crushed the housing market by raising interest rates, causing significant problems for both buyers and sellers in the United States.
“The Fed will make more renters in this country in the next two years than it has in the last 50 because mortgage applications are at all-time lows,” Mr. Cardone told the news outlet.
“Mortgages are double what rent is, and it doesn’t surprise me that real estate agents are feeling the brunt of this,” he added.
Mr. Cardone said that Fed Chairman Jerome Powell should “step aside” and allow the market to correct itself instead. The investor said that Mr. Powell has “failed miserably” in controlling the country’s inflation.
“What he has actually done is created and, in the meantime, stopped the housing industry,” Mr. Cardone remarked.
“He [Mr. Powell] should get out of the way. There’s no time in history in my lifetime that the Fed actually controlled interest rates.”
Mr. Cardone said the interplay between supply and demand is what fundamentally drives interest rate fluctuations, and that this dynamic persists as long as people are spending their money on housing.
“Interest rates will have to come down in order for pricing to come down. This is actually a contradiction to what most people think. But when interest rates come down, mortgage applications will go up and people will start selling their homes,” he explained.
Nevertheless, Mr. Cardone said he believes that the United States is entering the “greatest real estate correction” in his lifetime, one that will give “a great opportunity” for individual buyers in the market.
“It’s going to be a great opportunity for individuals, regular, everyday people to actually grab trophy real estate from institutions. This has never happened in the country. It’s going to be at epic levels,” he said.
New York remains the most rent-burdened metro with an RTI of 64.2 percent, far surpassing the other rent-burdened metros as well as the national average of 30 percent, according to the report.
Fed Maintains Interest Rates
The Federal Open Market Committee (FOMC) on Dec. 13 left interest rates unchanged at a target range of 5.25 percent to 5.50 percent, citing the need to achieve maximum employment and 2 percent inflation rate.
Recent data suggest that economic growth has slowed from the strong third quarter, FOMC members stated. While the labor market has moderated since the beginning of the year, employment gains remain strong as the unemployment rate has remained low. Inflation has also eased over the past year but remains elevated, the Fed said.
“The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the FOMC said.
“The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
Mr. Powell told reporters that higher borrowing costs have “flattened out” the housing sector and slowed business investment. This is leading to a slowdown in economic activity, although the GDP is poised to grow around 2.5 percent for the year as a whole.
“We are prepared to tighten policy further if appropriate,” he stated. “While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table.”
