For consumers weighing up buying their first home versus staying in rented accommodation, headlines about rental prices coming down may sway their decision. According to self-made property millionaire Barbara Corcoran, that choice is “dead wrong”—and individuals need to bite the bullet sooner rather than later.
The bar to get into the housing market is currently high: According to the National Association of Realtors, the affordability of homes across the U.S. Is at a three-year low. Figures for October suggest the median qualifying income for a family home is now $108,432 due to higher mortgage rates leading to increased monthly payments.
However, the average median family income comes in at $99,109, resulting in October’s affordability index falling to 91.4 from 94.5 just a month prior.
But Shark Tank star Corcoran is encouraging people—if possible—to cobble together their savings and get a foot on the property ladder, explaining that the barrier of interest rates is the very thing which will skew the market in years to come.
Speaking to CNBC’s Last Call, Corcoran explained: “You’re much better off buying something now while you can because if you don’t have a chip in the game, and you continue to be a tenant and wait the market out—which many people think they should be doing—they’re dead wrong.
“The minute interest rates come down…everybody’s going to be jumping into the market and you’re going to be paying a lot more for your house.”
The 72-year-old—who sold her business in 2001 for $66 million—said she expected mortgage prices to come down to around 6%, which in turn would heat up the market.
Consumers may also have grown overly dependent on ultra-low rates, the property titan continued. According to Trading Economics, the average interest rate between 1971 and 2023 was 5.42%, leading Corcoran to point out: “People relatively are seeing our current interest rates as a lot of money, they’re really not, they’re simply average.”
Rent temptation
Corcoran also acknowledged that recent data may have “tempted” renters to stay in their current situation. Indeed, data released Dec. 13 by Redfin revealed that the median U.S. Asking rent fell 2% year over year in November—the biggest decline since 2020.
Redfin chief economist Daryl Fairweather pointed out that increased supply has led to a surge in vacancies, and in turn “landlords are doling out concessions” in order to keep their tenants in situ.
Corcoran echoed his point but pointed out that a 2% decrease is a tiny margin, saying that while it may be “tempting” to hold onto a slightly cheaper rental, “if you have any way of getting the cash together and getting into the market… Buy yourself a house.”
This alluring trend in rental prices could also only be a temporary win, Corcoran added, emphasizing that although rental prices may have reached a peak, it is only in the short term.
The importance of luck
Corcoran, who said she chose the sale price of her business because it was her lucky number, added that the individuals who saw huge gains during the pandemic were a one-off.
Reacting to the news that some homes have increased in value by as much as 24%, Corcoran said there was “no sense, rhyme, or reason at all” as to why certain areas have spiked so much, adding: “They’re just lucky people.
“On top of the luck of buying a house that’s appreciated so much, they were helped with 3% interest rates. If you’re one of the people thinking, ‘Gosh, is that train going to come in for me?’—it’s never going to come in again. Interest rates are never going to come down that low again.”
Luck is something Corcoran has long credited in part for her business success, adding: “I’ve had many lucky breaks that perhaps I didn’t deserve, but I took advantage of them. When I saw the opportunity I went into that whole. That’s the kind of luck you take advantage of and make hay with.
“Most good entrepreneurs have an inner sense of when luck is playing on their behalf and they know how to take advantage of it.”
