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Kevin O’Leary, known also as “Mr. Wonderful” from “Shark Tank,” says the U.S. housing market is stuck, and it’s not going anywhere unless mortgage rates come down significantly.
“The housing market is frozen. Prices are up, inventory is down, and with mortgage rates stuck above 7%, both buyers and sellers are paralyzed,” O’Leary wrote recently on X. “Unless mortgage rates drop to around 5.5%, housing is not going to turn.”
In a recent interview with NewsNation, O’Leary explained why he believes the Federal Reserve won’t be cutting interest rates this year. “No, I don’t,” he said when asked if a rate cut could be expected. “If they do cut, it would be 25 basis points, which isn’t that material.”
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The reason, according to O’Leary, comes down to ongoing tariff uncertainty. “If you’re a CEO of an S&P 500 company… you don’t know where the landing zone is for the final tariff on your product or service. You have no idea,” he said.
Because companies aren’t sure whether they’ll face a 10% or 35% tariff, many are absorbing the extra costs for now. But if they start passing those costs on to consumers, inflation could rise again. That’s what the Fed is worried about. “[The Fed doesn’t] yet know when these behemoth companies are going to pass through these costs to consumers, which will be inflationary.”
That level of unpredictability, he said, has forced the Fed to sit tight. “If you’re the Fed, you just say, ‘I’m not doing anything until I know where we land.’”
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The impact on housing is clear, O’Leary argued. With mortgage rates above 7%, activity has stalled. “That does take the air out of the sales for home starts and for housing,” he said.
O’Leary believes mortgage rates need to fall to about 5.5% to get the market moving again. “That’s the magic number that gets everybody off their high knees and start looking for housing,” he said. But he added, “The chance of that is zero.”
For first-time buyers, this means settling for much less. “You’re going to end up buying 33% less square feet if mortgage rates are still between 7% and 7.5% versus 3.5% to 4%,” he said. “Your starter home is not going to be 1,500 or 2,000 square feet. It’s going to be 950 square feet, maybe a condo or something.”