Is This It? Investor Calls Upcoming Crash the 'Greatest Real Estate Correction Ever', Sees Opportunity for Regular Folks

One real estate investor is bearing witness to the start of what he believes is the industry’s “greatest” correction he’s ever seen.

“I just want to say that we’re entering the greatest real estate correction in my lifetime,” private equity fund manager Grant Cardone told “FOX & Friends” on Thursday while discussing the state of the industry.

“It’s [the real estate correction] going to be a great opportunity for individuals, regular, everyday people to actually grab trophy real estate from institutions. This has never happened in the country,” Cardone said.

“It’s going to be at epic levels,” he expressed.

Cardone claims that the current housing market downturn is entering uncharted territory. However, the market still poses significant challenges for buyers and sellers as interest rates remain at heightened levels and housing affordability continues to decline.

An aerial view of new home construction at a housing development in the Phoenix suburbs. With inventory low, home prices remain high even as demand drops. Getty Images

As the Federal Reserve has rapidly raised interest rates over the past year to fight inflation, the housing market has cooled significantly. Mortgage rates have shot up from around 3% to over 7% for a 30-year fixed rate loan. This has crushed demand, with mortgage applications falling over 40% from last year.

With buyers retreating from the market, inventory remains low while prices stay elevated. There were just 1.83 million homes for sale nationally in October, according to the National Association of Realtors – down 1.8% from the previous year. Home prices were up 6.6% year-over-year.

This combination of high prices and rising mortgage rates has damaged housing affordability. According to data from Moody’s Analytics, less than half of median-income families can now afford a median-priced home, down from 63% a year ago.

“It’s unaffordable for people to own a home today,” Cardone stressed while blaming the Federal Reserve for “single-handedly” killing the housing market with interest rate hikes.

"I just want to say that we’re entering the greatest real estate correction in my lifetime," private equity fund manager Grant Cardone told "FOX & Friends." FOX NEWS

“He [Fed Chairman Jerome Powell] has not controlled inflation. He has failed miserably. What he has actually done is created and, in the meantime, stopped the housing industry,” the real estate investor said.

To reinvigorate the sluggish housing market, Cardone is urging Powell to “step aside” and let the market correct itself without further rate hikes.

“Interest rates will have to come down in order for pricing to come down. This is actually a contradiction to what most people think. But when interest rates come down, mortgage applications will go up and people will start selling their homes,” Cardone told co-host Rachel Campos-Duffy.

The housing downturn has also started to affect the rental market. As declines in homebuying have left more households renting, rents have climbed over 7% nationally over the past year.

Moody’s Analytics found that in Q3, the U.S. rent-to-income ratio (RTI) declined slightly by 0.5% but remained elevated at 30% — a level indicating renters are “burdened" by housing costs. Renters who spend more than 30% of their income on housing are considered “cost burdened" by the U.S. Department of Housing and Urban Development.

Surging rents and home prices have made buying unattainable for many young Americans looking to become first-time homeowners. With first-time buyers making up just 26% of sales, below the historical norm of 40%, the housing market is missing a key demographic.

Younger generations coming of age in a high inflation, high housing cost economy are putting lifecycle events like getting married, having children, and owning a home on hold. This will have ripple effects on housing and the broader economy for years.

As buyers pull back, home builder confidence has sunk to lows not seen since the Great Recession in 2012 and 2008. Housing starts and new home construction is also declining rapidly.

This building slowdown will constrain badly needed supply in the years ahead. And inventory was already historically tight after a decade of underbuilding following the subprime mortgage crisis.

While the causes may differ, there is a sense that substantial housing correction is underway with similarities to 2008. Sales, prices, and construction are all slowing dramatically just as they did in the years preceding the subprime crash. Whether the coming correction reaches the same historic depths remains to be seen.

New Jersey, a microcosm of the national market, feels the correction keenly. While its proximity to major cities and beaches traditionally bolsters prices, even its desirable areas face cooling demand. Inventory in the Garden State remains tight, hovering around pre-pandemic levels, but sales have slumped by over 20% year-over-year. Median prices, though still elevated, have dipped slightly for the first time in over two years. This slowdown is particularly evident in coastal communities dependent on summer buyers, as affordability concerns force vacation homes off the table for many. While there's no guarantee New Jersey will mirror the "epic" correction Cardone predicts, the cracks are undeniable, offering both challenges and potential opportunities in the months ahead.