“It’s the only tool the federal government has for controlling inflation and getting hold of our economy, and they’ve wanted to slow it down, and it’s worked. A year ago, it was 9%, that was our inflation rate, now it’s down to 3%, and they’re going to hold firm until it gets exactly where they’ve targeted,” Corcoran answered. And that magic number for the Federal Reserve is 2%.
The average 30-year fixed mortgage rate reached 7.49%, as of the latest reading per Mortgage News Daily’s rate index. In the 52-week range, that’s the high (and it’s much higher than the low of 5.72%). It’s also a 22-year high, signaling that the era of 3% rates are long gone. But, Corcoran says, they’ll come back down, without specifying what they’ll come down to or when that’ll be—she only hinted that mortgage rates will come down enough to bring would-be buyers back to the market. Still, she said, the effect of record-high mortgage rates on the housing market isn’t necessarily what you’d expect.
“The housing market is surprisingly strong; everybody’s surprised by it,” Corcoran said. “Houses are not staying on the market. They all sell. One-third of them sell for over-ask price, and there are just not enough houses to go around, so as a result of that, the housing market is as strong as ever—and it’s so frustrating for buyers.”
And she’s right; there aren’t enough houses to go around. There’s a shortage of homes across the country, and what’s happening with mortgage rates has only tightened new supply further because of the so-called lock-in effect. Borrowers with a below-market mortgage rate are much less likely to sell their homes (and buy something new) because their monthly mortgage payments are almost guaranteed to be much higher, with rates hovering above 7%. That’s one less seller and buyer, which constrains both sides of the market. After giving a brief rundown on the housing market, Corcoran pivoted to answering viewers’ questions. The first asked if housing would be more affordable in future, given that it’s hard to find a home that’s not overpriced at this time.
“There’s not a lot out there,” Corcoran said, adding that everyone is having a hard time right now: “But I can tell you this, house prices are not going to come down.”
When mortgage rates come down, Corcoran nearly said, all hell would break loose, before she realized she might not be able to say that on TV. Buyers waiting on the sidelines will jump into the market, “and houses are going to go up in price all over again,” she added. “I wouldn’t be surprised if they go up by as much as 10% or 15% when that happens.”
It’s not the first time she’s said as much. Corcoran, again on Good Morning America, previously noted that home prices are going to “explode” the minute mortgage rates come down, as would-be buyers rush back into the market. So her advice for people looking to buy a home in the current market is to adjust their expectations, which, she noted, isn’t easy, especially when you know your neighbor bought their house at a lower price and lower mortgage rate. But Corcoran also explained that buyers should shop around for their mortgage rate, which can help. When answering another viewer’s question, Corcoran said it’s a good time to consider an adjustable rate mortgage, (which is simply a home loan with an interest rate that adjusts over time based on the market). Her advice, however, for people that have adjustable rate mortgages that are about to reset was a bit more blunt.
“Well, you really only have two choices: You either pay the bank or you get out of town,” Corcoran said, eliciting laughter.
Lastly, Corcoran was asked about any tips she can give to those thinking about selling their home. And while she said sellers have it easy, Corcoran did suggest that they hold off, at least for now.
“You really don’t need any help,” Corcoran said. “Everything is selling today…But if it was my house, I would wait until next year when all the buyers come off the sidelines when interest rates come [down]. I’m going to get a lot more for my house than I would get right now. So they have no problems. Nobody’s feeling bad for the sellers.”
While national house prices have held firm over the past year—only falling 1% between May 2022 and May 2023 according to the Case-Shiller National Home Price Index—home prices in some overheated markets like Austin are down over 10%. Then again, some Midwestern and Northeastern markets are up over 8% during the same time period.
