Kevin O’Leary issues blunt reality check to future homebuyers — how to ‘get on with life’ with no dream house

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Soaring home prices have been a pressing issue in America — and elevated mortgage rates only add to the strain. With the Federal Reserve’s recent rate cut, many homebuyers might expect borrowing costs to ease.

Not so fast, says “Shark Tank” investor Kevin O’Leary.

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“Even though the Fed dropped 25 basis points, which is a quarter of one percent, people are anticipating a big drop in mortgage rates — nothing happened, because the 10-year didn’t budge,” O’Leary said in a recent appearance on “Good Morning America [1].”

He explained that Fed policy has limited sway over long-term borrowing costs.

“Think about fixed income and mortgages — they’re kind of priced off five- to 10-year Treasury bills, which didn’t move because there’s a lot of concern about inflation, about debt, other things which have nothing to do with housing,” he said.

In other words, if bond investors are worried about inflation or federal deficits, they may demand higher yields to compensate — pushing rates up — regardless of what’s happening in the housing market.

Then came O’Leary’s blunt reality check:

“We’re never going to see 3.5% mortgage rates again, ever, in our lifetimes. But by the way, for 50 years, our parents and generations before us lived with 7% or 8% mortgages, so get over it everybody.”

Mortgage rates have indeed surged. The average rate on a 30-year fixed mortgage has climbed from below 3% just a few years ago to well over 6% today. And historically, as O’Leary points, there were decades when rates were far higher.

Given today’s elevated home prices and high borrowing costs that aren’t likely to change, O’Leary offers simple advice: “You just buy a smaller house and get on with life. Chop, chop.”

Buying smaller might become a necessity for many households. Realtor.com estimates that a typical U.S. household would need to earn about $118,530 annually to afford a median-priced home of $402,500 — more than 50% above today’s median household income of roughly $77,700 [2].

Despite today’s headwinds, real estate remains one of the most enduring paths to building wealth.