Grant Cardone
- Grant Cardone is expecting the "greatest real estate correction" of his lifetime.
- The investor sees offices and apartments slumping in value, presenting bargains to intrepid buyers.
- The Fed's rate hikes drove mortgage costs to painful highs, stifling the housing market, he said.
Get ready for a historic slump in property values that will throw up bargains for brave buyers, Grant Cardone says.
"We're entering the greatest real estate correction in my lifetime," the veteran investor told Fox Business in a recent interview.
"It will not include single-family homes, but it will include office where we're already seeing that damage, and we're going to see it across the entire apartment complex," he continued.
"It's going to be a great opportunity for individuals — regular, everyday people — to actually grab trophy real estate from institutions," he continued. "This has never happened in this country. It's going to be at epic levels."
Cardone is the founder and CEO of Cardone Capital, a private equity real estate investment firm with over $4 billion in assets under management. Its portfolio includes more than 12,000 apartment units and 500,000 square feet of commercial office space, according to the firm's website.
Commercial real estate has come under severe pressure this year. Developers rely heavily on credit from smaller banks, which have pulled back from lending since the regional-banking crisis this spring, as they're wary of further waves of deposit withdrawals.
The Federal Reserve has also hiked interest rates from nearly zero to north of 5% since last spring, which has made borrowing more expensive and pulled down commercial-property values. Moreover, the remote-working trend has sapped demand for office space, depressing prices even more.
It's notable that Cardone is predicting sharp declines in both office and apartment prices, given he's heavily invested in both types of real estate. He appears to see the potential slump as a chance to vacuum up cut-price assets, instead of a major threat to his portfolio.
Cardone slammed the Fed for hiking rates so aggressively that mortgage rates have surged to two-decade highs. Prospective sellers who've locked in cheaper mortgages are now loath to list their homes and take on a much higher monthly payment for a new place. Meanwhile, buyers have balked at paying top dollar for their next home and dealing with a costlier mortgage than they expected. As a result, the housing market has been essentially frozen for months now.
"The Fed single-handedly has killed the housing market," Cardone said. "It's unaffordable for people to own a home today."
"The Fed will make more renters in this country in the next two years than it has in the last 50," he added, pointing to the recent plunge in mortgage applications, and the fact that monthly mortgage payments are now double rent payments in some places.
The "Undercover Billionaire" star said that house prices will only drop once interest rates fall, as people will start applying for mortgages again, and owners will resume selling their homes.
It's worth noting the Fed signaled last week that rates may have peaked and it expects to cut them next year, which could pave the way for mortgage rates to drop and housing-market activity to pick up.