Barbara Corcoran Predicts Home Prices Will Go Up By 15%

The interest rates were growing for the last two years. Right now the mortgage rate is approaching 7.25%. A year ago the interest rate was a whole percent lower than now. As the inflation rate is slowing down, it is expected that the mortgage rate will follow this downward trend. According to Barbara Corcoran, a real estate expert of the Shark Tank fame, this will be the time when many consumers who were sitting on the sidelines will jump into the market and home prices will go up by as much as 10% or 15%. Don’t get hung up on these numbers, home prices grow at different rates in different areas. Even here in the Bay Area there is a huge difference in the rate of appreciation, for example, between the Peninsula and East Bay but it will be a subject of a different video.

When should we expect the interest rates to go down? Fannie Mae just came out with their mortgage rate forecast. They predict a mild recession in the first half of 2024 and that the interest rates will stay at elevated levels through 2024 gradually dropping to 6.4% by Q4. This interest rate reduction may not be enough to reignite the real estate market, most experts set this trigger point at around 5%. I am very skeptical about any predictions at this point because so few of them were accurate. At the beginning of this year nobody predicted that the rates would be above 7% now, in September of 2023.

Despite the high interest rates, the real estate market was unbelievably strong so far this year. The reason for that is shortage of housing, that there were so few homes coming to the market while the demand remained strong. Competition for the available homes was fierce because the number of new listings this year dropped by more than 30% compared with the same time last year. Homes are still selling very fast, the median time on the market this year stays only at 9 days, same as last year. Home sale prices were steadily growing as many homes sold with multiple offers and above the asking price.

And let’s put the current interest rate level in perspective. The all-time average fixed rate mortgage rate is 7.7%, and the highest ever recorded was 18.66% back 1981. After the Great Recession we got spoiled by very low mortgage rates and they may finally get back to historic average levels and stay there for a while.

Bottom line: if you are considering buying a home and you are planning to own it for a long time, 7,10 or more years, there is no better time to buy than now. Bay Area home prices were growing this year as mortgage interest rates inched up from low 6% range to over 7% and prices may continue to grow due to extremely limited supply. Scary though is that today home prices may be the lowest you will see in the foreseeable future. And when, as predicted, the interest rates will go down, you will be able to refinance your home at a lower rate, reduce your monthly payment while taking full advantage of the steady home value appreciation.

Michael Talis:
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