Barbara Corcoran: Prices are only going to go up in a U.S. real estate market 'gone bonkers'
In nearly all situations you put down 10 percent when you sign the contract to buy. In New York that's often a significant sum.
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Real estate legend Barbara Corcoran of “Shark Tank” has never seen the U.S. housing market behave the way it is now.
But it’s not a bubble, she told CNN anchor Christine Romans today as part of a discussion on the housing market. That’s because you don’t see the hallmarks of a housing bubble, like high foreclosure rates or investors artificially buoying housing prices.
Instead, what is happening now is “an unusual market that’s gone bonkers based on demand,” she says. “I have never seen it so hard for people to get their hands on a house,” with the exception of the New York City real estate market, she notes, which has seen major surges like this before. (The city often follows a pattern of peaks and booms that can be out of step with the rest of the U.S. but right now, New York buyers are suffering along with everyone else.)
“It’s not the type of market in which anyone feels any satisfaction,” she says. “Everyone is going 30 miles outside the area they want to be in." That’s because these days, she says, buyers are prioritizing larger places over location just to get into a house.
“Most are trying for a bigger house in a not-so-great neighborhood,” she says. But Corcoran recommends buyers consider the resale equation: “Ask yourself how will this house do in a ‘normal market’—when location is the driving factor?" Her advice: Aim for the smaller house in the better location.
Other traits of the current market: Buyers are waiving inspections and financing contingencies to avoid losing the property. This is dangerous, Corcoran warns.
If you are buying and waiving your inspection—at least bring in a contractor “even if it is your brother-in-law” to tour the house and give you an idea of what you are in for—like plumbing problems, or worse. “It’s a lot better than flying blind,” she says.
Corcoran describes the current market as “treacherous” for buyers, noting that if buyers have lost out on multiple houses, “an emotional thing happens—they go crazy and jump at the next house they see.”
(In New York City, bidding wars and deals involving all-cash buyers are climbing. Here’s advice on how you can compete with all-cash buyers.)
Does it make sense to wait for buyers to wait for housing prices to cool off next year? Will they cool off? Corcoran doesn’t see that happening—she says that not only will prices go up, but the cost of mortgages will rise too—albeit incrementally.
“When you do the math on what you pay with a one percent increase—your expenses are really going to ratchet up,” she says.
Her advice is to stay in the game, otherwise, “all you are going to do is wish you hadn’t waited,” she says.
Low mortgage rates will not last forever, but Corcoran says there’s no cause for panic—no one is predicting a spike, she says. The Federal Reserve’s plan is to slowly taper off purchases of mortgage-backed bonds, which have been keeping rates artificially low as sort of an economic stimulus.
“It’s in everyone’s interest to keep the housing market going,” Corcoran says.
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