Real estate mogul Grant Cardone has a message for aspiring homeowners – keep renting, at least for now.
In a Fox News interview on Wednesday, Cardone advised would-be buyers to hold off on purchases until the Federal Reserve lowers interest rates to 4%. He reiterated this stance in a tweet.
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“Wait to Buy a Home ’til Fed drops rates to 4%,” the tweet said. “Sellers will reduce prices as they are motivated to buy a new home (at a lower price) and demand will skyrocket as buyers can now afford a mortgage.”
Cardone’s advice comes at a time when homeownership feels increasingly out of reach for many Americans. According to data from the National Association of Realtors cited by the Wall Street Journal, homebuying affordability hit its lowest point since 1985 last fall and nearly matched that level again last month.
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“We still have a seller’s-buyer gap, and until interest rates breach 4%, you’re not going to see the volume necessary to unlock the supply-demand formula,” Cardone said during the Fox News interview. He argues that when rates fall, sellers will reduce prices to levels that will make homes affordable again.
However, waiting for 4% rates may be overly optimistic. The federal funds rate currently sits between 5.25% and 5.5%. While markets expect a potential 0.25% cut in September, that would still leave rates far above Cardone’s target.
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Today’s housing challenges extend beyond interest rates. Unlike the 1980s, when high rates were the biggest problem, buyers in the current market have to deal with elevated prices, tight inventory, and stricter lending standards.
“We still have not seen the price on homes come down and become affordable enough for people to actually buy a home or qualify for a home,” Cardone said.
That’s true. According to a Benzinga report issued in June, home prices have surged over 50% since 2019, far outpacing wage growth. In January 2021, a family needed $49,152 in annual income to afford a median-priced home with a 20% down payment. By last month, that figure had ballooned to $110,544, according to NAR data.
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The shift has reshaped the demographics of homeownership, according to the WSJ report. Today’s typical first-time buyer is 35, compared to 29 in 1984. Only 40% of millennials owned homes at age 33, versus nearly 60% of baby boomers at the same stage.
While Cardone’s advice might appeal to some, it offers little comfort to the millions currently struggling with housing costs. The path to homeownership for many Americans remains steeper than ever, and it will likely take more than a drop in interest rates to level the playing field.
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This article Grant Cardone Says Wait Until The Federal Reserve Drops Rates To This Number To Buy A Home originally appeared on Benzinga.com
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Source: finance.yahoo.com