“Shark Tank” investor Kevin O’Leary revealed the cold hard truth on America’s housing market, Tuesday, warning that September will be the start of “real chaos” for the U.S. economy.
“This was inevitable. We talked about it six weeks ago, and now you’re just starting to see the chips start to fall. The layering is as follows: The regional [banks] don’t know yet what their capital requirements are going to be. So, their loan books have closed like a turtle in a shell,” he explained during an appearance on “Kudlow.”
“This gets worse before it gets better. And what’s it doing to small business? Killing them right now,” he warned Tuesday.
The Federal Reserve’s aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly two decades, cooling the post-COVID, red-hot housing market.
Rates have been slow to retreat, hitting a fresh two-decade high last week. Freddie Mac reported that rates on the popular 30-year fixed mortgage are hovering around 7.09%, well above the 5.13% rate recorded one year ago and the pre-pandemic average of 3.9%.
Additionally, the Federal Reserve approved yet another rate hike in July, setting the key benchmark federal funds rate to the highest level since 2001.
O’Leary argues that the U.S.’s troubled banking market is going to cause “real chaos in a very short term,” spotlighting the devastating impact some of Congress’ short-sighted economic policies has had on the average American.
“What I anticipate is going to happen here, while we still have full employment which is remarkable, and you don’t put any capital into the small business sector, which is 60% of the jobs in America, you’re going to start to see some real chaos come September, October, November. This is an issue for Congress, Larry. It’s very simple,” he continued.
“They gave all their money to S&P 500 in two acts, the Chips and Science Act and the other, Inflation Reduction Act. Not a dime for small business. A trillion for the big boys, nothing for the small guys. And the small guys, they run America, so it has to be rebalanced somewhere, Larry.”