Barbara Corcoran: Cheap Money Is Going Away, So Buy A Home Now
All eyes are on the Fed today as Janet Yellen is expected to announce the first raise in interest rates since 2006. The housing market has been slowly recovering from its March 2012 bottom (according to the Case-Shiller Index), but it’s been largely aided by near-zero interest rates. Thirty-year fixed-rate mortgages remain below 4%, down from 6% in 2008.
So is the still-fragile housing market in for a shock today? It’s a mixed bag says, Barbara Corcoran, investor on ABC’s “Shark Tank” and founder of The Corcoran Group, a large real estate company based in New York. “The immediate reaction will be the same as it always is when interest rates are raised: It creates a psychological deadline for anyone who’s thinking about buying and sitting on the fence,” she says. “They get right off the fence and think it’s their last chance to get in there, so you’ll definitely see an uptick in sales nationwide.”
Unfortunately the uptick in home sales will be short-lived, says Corcoran. If rates continue to rise at a rapid clip, sales will eventually taper off. Fannie Mae chief economist Doug Duncan believes that markets have already priced in the Fed’s move and the rate hike will have no immediate impact on Treasury or mortgage rates. But while some of the Fed’s impact has been priced in, this week has been a volatile one for the market, and volatility tends to be serially autocorrelated.
Still, Corcoran is certain that 2016 will remain a sellers' market. “The inventory is getting tighter and tighter every month, we have 10% fewer homes to look at in America this month as opposed to last month,” she says. Buying real estate has less to do with dollars and cents and more to do with emotion, says Corcoran, and people are feeling secure: Bankrate’s Financial Security Index, which measures how American’s feel about their job security, savings, debt, net worth, and overall financial situation, has largely been on an upswing since 2014.
Corcoran says early 2016 will probably be one of the last times homebuyers can take advantage of low rates. “We’ve had it for so long that you start to think it’s your American right to have that kind of money, but it’s a ridiculously low-interest rate, even if it were to move up a couple of points.”
According to Corcoran, we’re right around the corner from the best time of year for potential homebuyers. The week between Christmas and New Years is when prices hit the floor, she says. “Nobody is looking and everybody who hasn’t sold their house has lost hope … I have seen ridiculous deals made year in and year out.”
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