If you’re thinking of buying a home, there’s no day like today to make the move, says Barbara Corcoran.
The rate on the benchmark 30-year fixed mortgage declined slightly to 6.79% last week, well below October’s peak of 7.79%, according to Freddie Mac. For homebuyers, the prospect of waiting for lower borrowing cost might seem awfully enticing.
But Corcoran, Shark Tank star and founder of the Corcoran Group, begs to differ.
In a conversation on Yahoo Finance Live, Corcoran cautioned lower rates could bring more buyers into the market, boosting competition and sending already lofty prices “through the roof.”
“If interest rates come down another point by year end, everybody and their mother and their in-laws are going to look for a new house, and the competition’s gonna be so fierce that house prices will have to go up,” Corcoran said.
Home prices grew at a record pace in January, as more buyers came off the sidelines. And that fierce competition has led to an eruption of bidding wars, which often drives prices even higher.
National Association of Realtors (NAR) data shows that during the first month of the year, the typical seller received 2.7 offers, and 16% of homes sold over the asking price.
An important contributor to all of this is an inventory crunch. In 2023, existing home sales hit the lowest level since 2005, as would-be sellers who are locked into low mortgage rates stayed put.
“There is such a shortage of houses right now, so prices have gone up despite everybody singing the blues,” Corcoran said. “It happened simply because there are a lot of buyers and not enough houses available.”
Supply is slowly improving. New listings jumped 3.8% in February to the highest level in 17 months, while the total supply of homes for sale rose to the highest level in a year, according to Redfin.
It’s a sign buyers and sellers are getting more comfortable with higher mortgage rates, says Lawrence Yun, NAR’s chief economist.
“More people are adjusting to the new normal for mortgage rates, which appears to be between 6% and 7%,” Yun said on Yahoo Finance Live. “There is a sizable group of delayed sellers who have been postponing, and they will begin to list their property.”
While more new listings signals good news for buyers, a dramatic improvement in inventory may take some time. Top economist Mark Zandi warned the market’s recovery will take “several years” to materialize.
“We can say with strong conviction that the housing market in terms of home sales and demand has probably bottomed,” Zandi explained. “Everything indicates [the 30-year mortgage rate] will likely go to 6% rather than 8%, and if that’s the case, we should start to see improvement, but this is a process.”
So what should you do if you’re on the sidelines, hoping for mortgage rates to drop or more home to come on the market? Corcoran’s advice is simple: Don’t wait. She advises that “right now” is always the best time to buy, and to give yourself an edge in a tight market, “write a love letter” to the owners of the house you’re eyeing.
“Run into a community, see which houses you like and leave love notes on every door,” said Corcoran, who suggested crafting a personal message around what you like about the home, even if it’s not for sale.
“It works. The last four houses I bought were not on the market. I just picked out the house I like best and eventually the people called [back],” she said.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email seanasmith@yahooinc.com.
The National Association of Realtors (NAR) has reached a $418 million settlement after a federal jury ruled that the organization and major brokerages had conspired to inflate broker commissions. The Corcoran Group founder Barbara Corcoran joins Yahoo Finance Live to discuss the impact of this settlement on prices in the housing market.
Corcoran believes that the ruling will not alleviate high housing prices. She highlights that the low housing inventory and increased demand have led to even more price increases. Despite this, Corcoran explains why people looking to buy homes should do so “right now. “It’s always my mantra,” she adds, “Not because I’m an ex-real estate broker by any means…but it always is true that the minute you go out into the marketplace when everyone else is out, you’ll always pay more. Why would you way for that?”
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Angel Smith
Video Transcript
– So Barbara, you mentioned confusion, and I think a lot of people are confused, me included, about what this is going to do to the price of homes, right? Because you have the argument out there that if you’re not paying for a fee here, an agent fee, then it makes more sense for the home seller, maybe they could list their house, their home a little bit more– maybe they’ll list it less because they’re not having to deal with those fees.
Then you also have the other side of the argument where this could actually attract more people into potentially buying a home, and get them off the sidelines here if we do see a drop in fees. What’s the ultimate impact on home prices?
BARBARA CORCORAN: I don’t really believe either of those things are going to happen. It’s a neutral. Think of yourself. If you’re selling your home, and if you, let’s say you save 3% with a new ruling and say, I don’t want to pay the buyer’s broker the extra 3%, do you think you’re going to pass that along to the buyer, which a lot of people are saying is the case?
No. Sellers are greedy. It’s a one-time chance to get the most for your house and you’re not going to give that money away. So if you think prices are going to come down, definitely not the case. There is such a shortage of houses right now, that prices have gone up despite everybody singing the blues. 9% this year, pardon me, 6% this year, how did that happen? It happened simply because of supply and demand. There’s a lot of buyers and not enough houses to be available. And that’s what rules the market.
– Do you see prices continuing that move to the upside?
BARBARA CORCORAN: I think the prices are going to go through the roof, especially if interest rates come down another point by year end. I think everybody and their mother and their in-laws is going to come out looking for a new house. And the competition is going to be so fierce that house prices will have to go up.
– So when should people be buying?
BARBARA CORCORAN: Right now, but that’s always my mantra. Always the best time to buy [COUGHS] not because I’m an ex real estate broker, by any means, but I’m sure I’m biased in my attitude toward it. But it always is true that the minute you go out in the marketplace when everybody else is out, you always pay more. Why would you wait for that?