Known for his investment savvy, Kevin O’Leary is warning about the ongoing surge in mortgage rates, which are currently at their highest levels in over 20 years.
The Federal Reserve’s decision to increase interest rates in March 2022 was aimed at curbing inflation, which had spiked to levels not seen in 40 years. While inflation has slightly decreased, it remains above the central bank’s target of 2 percent, keeping rates at a steep 5 to 5.5 percent.
O’Leary, a prominent figure on ABC’s Shark Tank, recently highlighted in an interview with Fox News how the housing market has reacted to the surge in interest rates over the past two years. Contrary to expectations of rate reductions, inflationary pressures have thwarted any significant drops, leading to significant fluctuations in housing prices.
According to Mortgage News Daily, mortgage rates have spiked to 7.2 percent, nearly double what they were just four years ago, resulting in a substantial 30-40% increase in housing costs, according to O’Leary.
Reflecting on the impact of the COVID-19 pandemic, O’Leary noted a demographic shift that influenced home prices. With more Americans relocating due to remote work opportunities and office closures during the pandemic, housing prices have surged.
Data from the Federal Reserve shows that the median home sales price soared to almost $421,000 in the first quarter of 2024, an eye-watering increase of nearly $100,000 compared to four years earlier.
In a changing America where remote work is more prevalent, O’Leary remarked, “We’re witnessing a new trend where urban dwellers are fleeing to suburban areas in search of better amenities, causing housing prices in rural areas to skyrocket. This digitized America is witnessing a surge in housing costs.”
Despite the escalating costs and uncertainties surrounding real estate investments, O’Leary remains cautiously optimistic, citing historical data that portrays real estate as a solid investment choice.