If you’re one of the many Americans who are looking to purchase a home in the new year — especially if you’re hoping to buy your first home — you’re likely watching the housing market like a hawk. Perched on a branch, you wait for the four-bedroom home in the best school district to scamper within your reach before you pounce. All dramatics aside, finding the right time to buy can feel like a waiting game that requires you to act in an instant.
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Barbara Corcoran gets it. The author, financial expert, “Shark Tank” star and founder of the successful brokerage firm The Corcoran Group also follows the real estate market closely. In an interview on “Cavuto: Coast to Coast,” she opined that even with recent market fluctuations, reaching a 5% mortgage rate would make the market “go ballistic.”
The word “ballistic” can have a number of connotations. It begs the question: Would this “ballistic” market be good for buyers, sellers, or both?
Making It Easier To Borrow Could Cause a Buyer Frenzy
Though rates aren’t as low as they’ve been in the past — according to The Mortgage Reports, a conventional 30-year fixed mortgage rate hovers around 6.8% — Corcoran said that buyers have mostly remained undeterred. A lower rate could only energize them further.
“The buyers themselves have gotten accustomed to the rates being what they are, and they just got tired of waiting. But I am wondering if we’ll ever see a 5% number because anything with the 5% in front of it is going to make this market go ballistic,” she said.
Corcoran added since rates have been fluctuating around 6% or 7% for a while, consumers don’t exactly have the highest expectations for a dramatic drop. However, if the rate were to fall to 5%, she noted that “it would be incredible for the market,” likely triggering a buying spree.
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There’s a Need for New Homebuyers
Part of the reason Corcoran is envisioning a “ballistic” market is that she’s concerned about the declining number of first-time homebuyers.
The real estate expert highlighted that first-time buyers now account for just 24% of home purchases, the lowest level in history. Meanwhile, the share of all-cash buyers has reached a record high of 27%, highlighting increased competition for traditional buyers who rely on mortgage financing. All-cash offers are often more appealing to sellers because they can close faster and have fewer contingencies.
Corcoran emphasized the desperate need for more first-time buyers, who aren’t getting a fair shot in today’s market. A report from the National Association of Realtors backs her up, noting that first-time buyers face significant hurdles, including high home prices, limited inventory, and elevated mortgage rates — they’re struggling to enter the market, period.
Housing Rates Impact the Whole Economy
Another reason a dip to a 5% mortgage rate could trigger a “ballistic” market is the broader economic impact. A dip could cause a buying frenzy; but if rates climb higher, the market could slow down, and with it, the broader economy.
More industries depend on the housing market than one might think, and they’re all tied to how excited people are to buy. Lowering rates could inject fresh energy into the market, keeping housing-related services busy and thriving.
Fortunately, Corcoran suggested that experts don’t anticipate a significant rate increase in the near future.
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This article originally appeared on GOBankingRates.com: Barbara Corcoran: If Mortgage Rates Hit This Number, the Market Will ‘Go Ballistic’
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