Greg Englesbe
Real Estate Investing

‘Shark Tank’ investor Barbara Corcoran says home prices will skyrocket when interest rates come down

For most of this year, the U.S. housing market has been in a holding pattern.

High mortgage rates and home prices are putting off many would-be buyers who feel the value proposition is out of balance for them. At the same time, would-be sellers realize that they’ll be facing the same market on the other side and feel it’s better to stay put at their current, favorable rates.

Barbara Corcoran, the “Shark Tank” investor and head of a New York real estate brokerage, believes it’s only a matter of time before home prices see another surge like those that happened during the first two years of the COVID-19 pandemic.

“The minute those interest rates come down, all hell’s going to break loose and the prices are going to go through the roof,” Corcoran said, via Yahoo Finance. “(Right now sellers are) staying put. But they’re not going to stay put if interest rates go down by two points.”

The Fed has been aggressive over the last 18 months in raising the benchmark interest rate, with a goal of containing inflation to a target of 2%. Fortune reported this week that the Fed’s success in bringing inflation down this year could mean additional rate hikes are unlikely, or perhaps limited to one more later this year.

A forecast from the American Bankers Association’s Economic Advisory Committee projects that consumer price inflation will fall to 2.2% by the end of 2024, down from 3.2% this July and a record 9.1% the previous July. Unemployment is expected to rise to 4.4% by the end of next year, up from 3.8% in August. Economic growth will also slow in response to tighter credit conditions.

This is viewed as a “soft landing” scenario that avoids a recession. The ABA committee, which includes economists from some of America’s largest banks, predicts that the Fed will likely cut the benchmark rate by roughly 1% by the end of next year.

Corcoran believes this will trigger a real estate boom similar to the one seen in 2020-2021.

“It’s going to be a signal for everybody to come back out and buy like crazy, and the house prices (will likely) go up by 20%,” she said. “We could have COVID (market) all over again.”

Corcoran called the current market a “bottleneck,” but she believes forces are in motion to alter the landscape.

“Sellers don’t want to move from their apartment or their home because they don’t want to take on higher interest rates,” Corcoran said, “And buyers are too afraid (to buy) because they are getting less house (for the price). So you’ve got a standoff going on. But things are changing.”

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