WARNING: Is The Housing Market About To CRASH In 2021? | Kevin O'Leary

Commercial real estate down. Residential real estate up. When you buy a home and it needs a renovation, the only two things you should care about are kitchens and bathrooms. But a little ratty movie theater that's not going to get any capital spent on it, and your feet are going to stick on the carpet—who wants to go there? They're going to zero.

See how nimble I am, like a Giselle. But I want to talk about real estate, and what better place to do it than in Miami? Real estate's booming here; it's exploding! We're going to check it out, we're going to cruise around, look at some of these amazing towers, and talk about prices.

There's some really crazy stuff happening in real estate because I've been a real estate investor for 20-30 years. Usually, it was the core holding in my portfolio, but that's changed quite a bit. So, let me tell you what I'm thinking. Commercial real estate is going through dramatic change. Why? The pandemic changed the behaviors of everybody all across America.

Let's just take for example big office towers in New York City or in Boston or Detroit or any city. You know, before the pandemic, everybody went to HQ to go to work. Everybody said, "Okay, let's get in the elevator with 60 people, go up to the 78th floor." But that's all changed. We've proven in this economy, because of COVID, that many people, let's say in accounting, compliance, logistics, they don't want to work in their cubicle anymore—they want to work at home.

They've learned over the last year that they can do it successfully, so they don't want to come back. That reduces the demand for office square footage dramatically. Think about this. You know, I know we're getting vaccinated, and that is great, but there are new strains every year. There'll be a percentage of the population that never takes the vaccine, so COVID's coming back like the flu each year.

I think people are going to be more health-conscious. They're not going to want to be jammed into elevators going up to the 78th floor anymore; they're going to want to work from home. That's a bit of a trend we don't know yet the total impact of it. So you’ve got this diminishment of the value of office space, and commercial real estate and retail space has a lot of stores and third grade malls, like really cheap places.

They're not making any money because people are buying everything from Amazon and direct from companies. That's called the great American digital pivot. So there's another asset class in real estate—basically 1200 square foot strip mall stores and all kinds of other malls that are not doing so well.

That's the bad news. Here's the good news. People want to live at home. They want to have their own space; they want to have a place they can live and work, raise their kids, take care of their parents, whatever they're going to do. So you've got this two different spheres of value: commercial real estate down, residential real estate up.

How up? Big time! Up crazy! Look at this city I'm in right now. Taking you on a tour of Miami, this is one of the hottest real estate markets in the world. Now before I go on, I want to talk about our sponsor this week—one of my favorite companies. You guys know I don't endorse anything that I don't use myself, ever. I'm wearing a Robach shirt; I love this company.

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They come shipped to you; they're beautiful. I've got a ton of these and they look terrific. Alright, back to what I was talking about. So if you really think about it, you've got this split market. You've got commercial real estate, which I think is going to go down in value over the next couple of years—not much, but it's going to—and I've taken my money out of that and I've gone into residential.

Residential real estate is going to be really interesting for the next few years. Think about it! People don't have to work in a ratty little cubicle; they'd rather have gotten the burbs and worked there. Makes total sense, right? But it's also going to reflect in the value of residential.

So, you know, if you're an entrepreneur, there's no question that the trend to continue to buy homes and upgrade them—they call it flipping. I don't call it flipping; I call it investing. Because you're going to fix up the kitchen and the bathrooms. So, let me tell you about investing in residential.

When you buy a home and it needs a renovation, the only two things you should care about are kitchens and bathrooms. Building a movie theater in the basement? Total waste of money; you don't get any return on that. I know it sounds cool to have a man cave, but the major purchase decision is often made by the matriarch of the family. The woman is walking in and saying, "Where do I live? In the kitchen? Where do I live?"

I want great washrooms, and I agree with that completely. I love to hang in the kitchen; why? That's where my family is. We're always hanging around, we're talking, we're putting the popcorn on, we're grilling outside, coming into the kitchen, we sit around the counter—that's the zone; that's the family zone.

Every dollar goes there first. Every guy likes to shave in a nice bathroom; I like a little TV there. I like to watch TV in the morning when I'm shaving. I like a shower. I like a steam shower. These are all great investments. I know everybody says to me, "Put in a bathtub." I never use a bathtub; I love the shower. That's the way I look at it.

So I would say that if you're thinking about investing in real estate, go residential, not commercial. There will be a chance. Think about something like Bed Bath and Beyond; they closed 200 stores across America. Why? Because their online direct consumer business was up 76%.

What's going to happen? The stores—they're not going to be stores anymore. They have to be converted to climate-controlled pick-packing facilities with robots and ship stuff out to the suburbs. Think about those crappy little movie theaters in those malls—the tiny ones, not the big ones.

I think they come back, you know—the IMAX, that kind of thing. But a little ratty movie theater that's not going to get any capital spent on it and your feet are going to stick on the carpet—who wants to go there? They're going to zero. Another class of real estate—a big problem.

I just think you have to be pragmatic. Think about the way you're going to live, even after we all get vaccinated, which, by the way, is not going to happen 100%. There's going to be a lot of people that don't want to take the vaccine, so maybe 80% get vaccinated. The other 20% keep bringing it back every fall.

That's going to be a huge problem. I want to talk about this in the context of investing because real estate is a core holding for so many people and families. It's your number one asset, and in America, owning a home has always been what everybody wants.

Wow, that was like one of those cigarettes—suppose you could die at 100 miles an hour! That's what you get in Miami—crazy people. I think they should stop that guy; he was speeding. What are you going to say?

Anyways, at the end of the day, I think my thoughts are out there. No net on commercial real estate. You wait 24 months; let the prices come down, maybe go back in then because I think they are coming down. Residential? Yeah, everywhere!

And if you're into it, buy places that need a renovation and fix the kitchens and the bathrooms and resell them. I think you can get really high returns on that. If you like that video, wait! Did you see my next one? Don't forget to click right over here and subscribe.

I don't think these commercial properties are going to do well at all. In fact, I think they're going to lose a substantial portion of their value over the next six months to a year.