Lower mortgage rates could lead to higher prices
Corcoran says “there’s a magic number” that could make homebuyers crawl out of the woodwork, stir up demand — and cause home price growth to escalate even further.
The median home sale price is about $374,500, according to the latest data from Redfin — a 4.6% increase from last year.
“If you wait for interest rates to come down by another point, I don’t think you’ll gain — I think you’ll wind up paying more,” Corcoran warns. “I wouldn’t be surprised if real estate went up by another 8% or 10% if interest rates come down a full point.”
The Mortgage Bankers Association forecasts rates will end at 6.1% by the end of 2024, while Fannie Mae is anticipating them to dip to 5.9% during the fourth quarter.
The Fed is expected to introduce cuts to the federal funds rate, which would impact home loan rates as well.
Analysts at Wells Fargo say that while lower financing costs and a boost in supply could help turn around the slump in home sales, recovery will be restricted by home price appreciation outpacing income growth — as demand continues to surpass supply.
“This dynamic, which is unlikely to change materially, ultimately stands to exert upward pressure on home prices and keep homeownership costs elevated,” analysts wrote in a recent report.
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Corcoran is echoing the same remarks she made in December, when she encouraged Americans to buy sooner rather than later to avoid a surge in demand and prices when mortgage rates fall.
“Find yourself a great broker who knows how to hustle because there’s always a deal to be had — no exceptions to that rule,” Corcoran advised in an interview on ABC News.
She also recommended getting pre-approved for your mortgage, which lets lenders know you’re a serious buyer.
It’s entirely possible that you could secure a home today and refinance into a lower rate in the future when mortgage rates fall — but there are many folks who don’t have the funds to purchase now, or aren’t willing to take the risk that mortgage rates unexpectedly tick up this year instead.
But there are still other options for those hoping to invest in real estate. For example, you could grow your income by investing in shares of vacation homes or rental properties. Or you could get into the commercial space by buying shares in institutional-quality properties leased by national brands like Kroger and Walmart.
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