Shark Tank star Barbara Corcoran has some bad news: Interest rates are never going to be as low as they were during the pandemic again. But she’s got some good news, too—the current rates, hiked to a near 23-year high by the Federal Reserve, make now the ideal time to enter the housing market.
The New York mogul cut her teeth in property, bouncing back from the brink time and again to build her business, the Corcoran Group, into the behemoth she sold for $66 million in 2001.
And Corcoran, a fierce advocate of taking risks, says she once again sees an opportunity for buyers to get ahead of the market—if they’re brave enough to try it.
“Interest rates just hit a 23-year high and…what that’s doing is pushing more buyers onto the sideline, and they’re going to wait it out,” Corcoran said in a video posted to her Instagram.
Is the housing market slowing down?
Data certainly seems to prove at least part of Corcoran’s theory.
The most recent report from the U.S. Census Bureau and the Department of Housing and Urban Development showed new-home sales were down 8.7% from the month prior.
A total of 675,000 new homes were sold in August, with an average price of $514,000.
Meanwhile, existing-home sales fell 0.7% during the same period.
As Corcoran pointed out, high interest rates have not only squeezed the disposable income of consumers, but have also pushed up mortgage prices.
Mortgage rates currently stand, on average, at more than 7% in the U.S., analysis from Bankrate has shown. Data from the organization shows that just two years ago, 30-year fixed mortgage rates stood at an average 2.96%.
Earlier this month, the Mortgage Bankers Association said mortgage demand had dropped to its lowest level since the mid-1990s.
In the face of such uncertainty, many may be inclined to follow the crowd until rates come down—but Corcoran doesn’t believe this is the right move.
“The days of the 2% or 3% interest rates are never going to come again, forget about that,” she said. “But they will come down and…the minute they drop and come to anything with a five in front of it, the whole world’s going to jump back in the market.”
As a result, she believes “there’s going to be no houses around, and prices are going to go up by 10% or even 15%.”
“Don’t get out of the market,” she advised. “This is the very best time to buy a house because everybody’s scared.”
Affordability is already strained
Corcoran’s warning that prices may pop again once interest rates come down will be a concern for those looking to get on the ladder for the first time.
In September, JPMorgan said housing affordability is at a 30-year low, but although some buyers are being muscled out of the race, it hasn’t held back competition.
“Last year’s property market was red-hot before the rise in interest rates,” Michael Rehaut, head of U.S. Homebuilding and building products research at J.P. Morgan, said in a research note.
“Let’s think of it conceptually,” he added. “At that time, there were perhaps five buyers for every available home. Today, reduced affordability may have taken out some of those qualified buyers, but there are still two or three per home.”