"Affordability is down about 40%" — Shark Tank investor Kevin O'Leary shares how soaring insurance and tax costs halt home purchases across key states

Shark Tank investor Kevin O’Leary recently shared that affordability in the U.S. housing market has declined by approximately 40%. In a clip from his Fox Business interview shared on Instagram on May 30, 2025, O’Leary explained the combined impact of three key cost drivers on homebuyers in several states.

“So you combine the insurance costs with the taxes plus the mortgage, affordability is down about 40%,” he noted.

He added that this shift has led to significant reductions in the amount of property buyers can afford, with a visible slowdown in real estate activity across regions such as California, Texas, and Florida.

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Shark Tank's Kevin O’Leary breaks down how rising costs make homes 40 percent less affordable

Rising insurance costs create major pressure

According to Kevin O’Leary, insurance expenses have emerged as one of the most significant new pressures in certain housing markets. In states such as California, natural disaster risks have become a key factor affecting the availability and cost of coverage. During the interview, the Shark Tank investor pointed to conditions such as earthquakes, flooding, and fires. He stated:

“Insurance is a huge, huge problem now...If it isn’t earthquake, it’s flooding. Now you got fire. You get fried, drowned, and shaken there. And nobody wants to actually insure that.”

O'Leary stated that these risks have made it more difficult and expensive for homeowners to secure insurance, contributing to the broader decline in purchasing power. He noted that the rising insurance burden, particularly in high-risk areas, is now playing a more prominent role in overall affordability calculations, which traditionally focused more on mortgage rates alone.

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Tax increases add to long-term cost burdens

Beyond insurance, O’Leary pointed to state and local taxes as another growing concern for homeowners. He said:

“There’s three issues now...Obviously, mortgage is number one… But there’s two other things that have come out of nowhere, particularly places like California. Insurance and taxes.”

Kevin stressed the combined burden with existing mortgage obligations, saying that these tax increases have raised the total monthly and annual cost of homeownership. He added that the pressure limits the size and quality of homes buyers can afford within the same budget.

The Shark Tank investor emphasized that even in states not traditionally associated with high taxation, such as Texas and Florida, certain counties are experiencing comparable affordability challenges due to local tax policies.

“Same issues in Texas, same issues in certain parts of Florida,” he noted.

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Mortgage rates remain a consistent factor

While new challenges have developed, he mentioned that mortgage rates continue to play a foundational role in determining home affordability. O’Leary acknowledged this during his remarks, stating:

“Obviously, mortgage is number one, it always has been in driving decision purchase.”

He explained that the ongoing presence of high mortgage rates compounds the effects of rising insurance and tax costs. Together, he stressed, these three elements are significantly reducing what buyers can afford.

“You got to buy a house with 40% less square footage and pay the same amount on it,” O’Leary said, summarizing how buyers’ purchasing power has shifted.

To illustrate, the Shark Tank investor cited a scenario where a buyer previously could afford a 2,500-square-foot, three-bedroom home for $1.2 million.

“Forget about it...You’re living in a trailer home now for the same price it cost in California,” he said.

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