Interest Rate Cuts Could Lead to Increase in Home Prices According to Barbara Corcoran

The heightened competition has led to a surge in bidding wars, often resulting in further price escalation.

According to real estate tycoon Barbara Corcoran, there’s no better time than the present to purchase a home.

The interest rate on the standard 30-year fixed mortgage witnessed a slight decrease to 6.79% last week, significantly below the pinnacle of 7.79% observed in October, as per Freddie Mac’s data.

However, Corcoran, a renowned Shark Tank personality and the founder of the Corcoran Group, holds a contrasting view.

With the possibility of lower borrowing costs looming, potential homebuyers might find the allure of waiting quite tempting. (Credits: Tinnakorn Jorrunang)

During a discussion on Yahoo Finance Live, Corcoran cautioned against the assumption that reduced rates would translate to advantageous conditions for buyers.

Instead, she forewarned that lower rates could potentially trigger a surge in buyer activity, intensifying competition and propelling already lofty prices “through the roof.”

“If interest rates drop by another percentage point before the end of the year, everyone and their extended family will be searching for a new home, intensifying competition to such an extent that house prices will inevitably escalate,” Corcoran remarked.

This heightened competition has led to a surge in bidding wars, often resulting in further price escalation.

Data from the National Association of Realtors (NAR) indicates that in the initial month of the year, the average seller received 2.7 offers, with 16% of homes selling above the listed price.

Home prices experienced unprecedented growth in January, spurred by increased buyer participation. (Credits: Mitch Haaseth)

A significant factor contributing to this scenario is the scarcity of inventory. In 2023, existing home sales plummeted to their lowest level since 2005, as potential sellers benefiting from low mortgage rates chose to remain in their properties.

“There is currently a severe shortage of homes, leading to price increases despite prevailing pessimism,” Corcoran remarked. “This is solely due to an abundance of buyers and a scarcity of available properties.”

While the supply situation is gradually improving, with new listings surging by 3.8% in February to reach their highest level in 17 months, and the total inventory of homes for sale rising to its peak in a year, as reported by Redfin.

Nate O'Hara
Nathan is a seasoned commerce writer with a passion for unraveling the intricacies of the business world and distilling them into engaging narratives. During his academic journey, he delved deep into subjects like economics, marketing, and entrepreneurship, honing his analytical skills and developing a keen understanding of market dynamics.