Barbara Corcoran isn’t afraid of high mortgage rates, and she doesn’t want you to be either. In an interview with Bloomberg Television, the self-made real estate millionaire and Shark Tank star said it’s a waste of time to worry about rates because you have no control over them.
“I would say, get out there…you need one more point to bring everybody out into the market, and what’s going to happen is you’re going to pay more for the house,” Corcoran said. She continued: “Wait until you see what happens with prices when interest rates come down another percentage point.”
Her comments come as mortgage rates are sliding. In the last month alone, weekly mortgage rates dropped to their lowest level in more than a year and daily rates plummeted to a 52-week low, although they’ve fluctuated since. Nonetheless, it is substantially better, in that it’s cheaper to borrow money for a home or refinance an existing mortgage, than last year. Still, the more rates fall, in her opinion, the more people will come off the sidelines, sending prices leaping.
It isn’t the first time Corcoran has made this point and probably won’t be the last. Earlier this year, she said she wouldn’t be surprised if home prices went up another 10% once mortgage rates come down just a percentage point.
Last summer, she said: “It’s a good time to buy because the minute interest rates go down—everybody’s waiting for them to go down even by a point—and when they do, they’re going to come rushing back in the market. Prices are going to explode, and you’re going to be paying more for the same house.” And on another occasion, Corcoran said she could see prices increasing between 10% to 15%.
She happened to experience a world, back in the early 1980s, when mortgage rates soared to 18%, and remained in the double digits for roughly five years—so that helps. But mortgage rates are still much higher than they were during the pandemic—at the moment, the weekly rate is 6.49%, and the daily rate is 6.58%. Still, Corcoran knows it isn’t simply mortgage rates that are keeping people from buying. Rents and home prices are high too.
“I worry about it all the time on two fronts,” she said, referring to the affordability crisis. “Rents keep going up…and that’s a real concern, so people can’t afford the rents based on their income. And I also worry much more about people getting their piece of the American dream, buying their first house, because the starter house market is the hardest hit.”
Rents soared during the pandemic, but they have somewhat flatlined because of a boom in multifamily supply. That being said, rents are very high, and the wave of apartment supply won’t last forever. On the other hand, since the start of the pandemic, the salary Americans need to buy a starter home has almost doubled. Not to mention, renting a starter home is still cheaper than buying one in all 50 major metropolitan areas.
“There’s so much competitive bidding, so much going over the price, and so much fear going around because people feel like they can’t get ahead,” Corcoran said. “Starter prices are a real problem in America, and they’re going up everywhere.”
And they definitely are. Whether it’s the $200,000 starter home, or the $300,000 starter home, they’re vanishing.