- 📉 Grant Cardone predicts a significant real estate correction within the next 12 months.
- 🏠 Cardone views owning a home as a potential liability rather than an investment.
- 📊 Rising interest rates in 2024 have slowed the housing market, with existing home sales falling.
- 🧾 The current mortgage rate around 6.7% makes monthly payments significantly higher.
- ✔️ Homeowners continue to hold significant equity, keeping foreclosure rates below historical levels.
- 🏘️ Cardone sees a unique opportunity in the multifamily market due to upcoming $525 billion in multifamily debt.
- 💼 Institutions may release multifamily properties as loans come due, potentially reducing property prices.
- 🇺🇸 Florida’s housing market shows signs of weakening with increased inventory and slower home sales.
- 🏦 Interest rate cuts could determine the fate of multifamily property sales.
In recent statements that have taken the real estate world by storm, renowned real estate investor Grant Cardone has forecasted a massive real estate correction within the next year. With his controversial stance that owning a home can be more of a liability than an investment, Cardone’s predictions have raised eyebrows. In this long blog post, we’ll delve into his insights, examine the current state of the housing market, and explore the potential opportunities and risks for investors.
Understanding Grant Cardone’s Prediction
Grant Cardone is no novice when it comes to the real estate market. Known for his forthright opinions, he recently made a bold claim:
“We are going to have the biggest real estate correction we’ve ever had in the next 12 months. It will be a monster and it will hit Gen Zs in a way that they’ll never touch that asset class again.”
Cardone believes that the impending correction will significantly impact young investors, particularly those from Generation Z, potentially deterring them from future real estate purchases.
Homeownership: Investment or Liability?
One of Cardone’s more controversial views is that owning a home is not an investment but rather a liability. This perspective challenges the conventional wisdom that homeownership is a cornerstone of financial stability and wealth accumulation. Cardone argues that the costs of homeownership—maintenance, taxes, and mortgage interest—outweigh the benefits, especially when compared to other investment opportunities.
The Current State of the Housing Market
Rising Interest Rates
The year 2024 has seen a noticeable slowdown in the housing market, largely driven by rising interest rates. With the current mortgage rate hovering around 6.7%, monthly payments for homebuyers have become significantly more expensive. Here are some key data points to consider:
- Existing Home Sales: Fell by 2.8% year over year in May 2024.
- Interest Rates: Increased to approximately 6.7%, up from much lower rates just a few years ago.
Homeowners Holding Significant Equity
Despite rising interest rates, homeowners have managed to maintain substantial equity in their properties. This equity has been a buffer, preventing a spike in foreclosure rates, which remain below historical levels:
- According to the Q1 2024 U.S. Foreclosure Market Report from Attom Data, foreclosure filings are up 3% from the last quarter but down less than 1% from a year ago.
Opportunities in the Multifamily Market
While Cardone’s outlook on the single-family home market is grim, he sees potential in the multifamily sector. The key factor here is the impending maturity of a large amount of multifamily debt:
- $525 billion in multifamily debt is due over the next five years, with $146 billion maturing in the timeframe Cardone suggested.
Cardone believes this is a moment of “true generational wealth distribution,” where everyday investors can acquire multifamily properties that institutions might be forced to release due to maturing loans.
Market Dynamics
Several elements are at play in the multifamily market that could create opportunities:
- Stabilization of Rental Rates: While rental rates have stabilized recently, some oversupplied markets have seen decreases.
- Delinquency Rates: Multifamily delinquency rates are rising but remain lower than those of other commercial real estate asset classes.
- Interest Rates: The trajectory of interest rates will significantly influence whether institutions decide to hold or sell their multifamily assets.
Florida: A Market in Flux
One of the regions showing early signs of a market correction is Florida. Historically volatile, the state’s housing market is experiencing several stress indicators:
- Home Sales: Down by 15.2%.
- Median Time on Market: Increased by 16 days.
- Inventory Levels: The number of homes for sale is up 39.2%.
- Price Adjustments: The number of homes sold above the list price has decreased, while price cuts have become more common.
These changes suggest that buyers are less willing to purchase at the current prices, signaling potential downward pressure on home values.
The Interest Rate Wildcard
The unknown factor in this equation is the behavior of interest rates moving forward. If interest rate cuts occur slowly, or if banks remain unwilling to finance at favorable terms, the likelihood of a significant market correction increases. Conversely, faster rate cuts and favorable financing terms could stabilize the market, mitigating the potential for widespread property sell-offs.
Conclusion: Preparing for Potential Turbulence
Grant Cardone’s predictions paint a picture of potential volatility but also highlight unique opportunities for savvy investors. As we navigate the next 12 months, the key will be to stay informed, monitor market indicators closely, and be prepared to act quickly on emerging opportunities, particularly in the multifamily sector.
