Real estate guru Barbara Corcoran predicts falling mortgage rates could make housing market ‘go ballistic’

Property guru Barbara Corcoran has revealed the fall in mortgage rates she believes will cause the housing market to “slide”, as she warned there is a “desperate need” for more first-time buyers to enter the property ladder.

Corcoran, 75, shared her expert insights on the current state of the market during an appearance on Fox Business’ “Cavuto: Coast to Coast.”

She told host Neil Cavuto that if mortgage rates fall somewhere within the 5% range, it could trigger “tremendous” home-buying activity.

Since December. 12, mortgage rates fell to 6.6% from 6.69% a week earlier, falling for the fifth consecutive week.

Noting that mortgage rates have been “increasing” between 6% and 7% for some time now, Corcoran admitted that she doesn’t know if “we’ll ever see a 5% number. However, if a decline were to occur such, “would be unbelievable to the market”.

“Prices have been going up for a while now … so people are confused, they don’t have high expectations, they’re not waiting for a tremendous rate drop anymore. But if that happens, God, that would be incredible for the market”, she said.

“Buyers themselves are used to the rates being what they are, and they just got tired of waiting,” she continued. “But I’m wondering if we’ll ever see a 5% number, because anything 5% ahead is going to make this market go ballistic.”

“We need more first-time buyers”

Corcoran, who is also a savvy investor on “Shark Tank,” said on the show that what the market needs right now is more people willing to buy a home for the first time.

“What we’re missing now and what we desperately need now are more first-time home buyers,” she said, before offering a shocking statistic: “Less than 24% of people are first-time buyers, an all-time low.”

Sales of existing homes are up

Interestingly, in a potentially bright spot, existing home sales rose last month by 3.4%, she noted.

This is the first year-over-year gain in existing home sales in “the better part of three years,” Cavuto noted.

However, she added that “first-time buyers weren’t really a part” of those sales.

Corcoran noted that the increase in home sales is not a big surprise given that there are more “homes on the market.”

She added that while buyers have choices, they’re also used to the status quo and aren’t holding their collective breath for a mortgage downturn.

“So there was 25% more choice for the shopper going out and looking. Moreover, the buyers themselves are used to the rates being what they are and got tired of waiting,” she said.

Buyers would go ‘ballistic’

Echoing Corcoran’s view of the impact low mortgage rates could have on the market, Realtor.com® Chief Economist Danielle Hale agreed that it would be a big deal for buyers.

“Any drop in mortgage rates will make a difference for some homebuyers who are in the gap,” Hale explains.

While Hale doesn’t foresee a giant rate cut, she agrees that a sharp drop would certainly shock the market.

“If we see a slow, gradual decline in mortgage rates, which is more in line with Realtor.com®’s forecast, I think we will see a gradual increase in buyer and seller activity. If we were to see a sharp drop in mortgage rates to 5%, that could bring in a lot of buyers and sellers at the same time – and really shake up the housing market. It will be about not only the rate itself, but how we get there.”

Conversely, a rise in mortgage rates could slow things down.

“It could slow down the whole market, it would slow down the whole economy, it would slow down all the support services for the housing market — it would be a terrible thing,” she says of a higher mortgage rate.

However, Corcoran also does not foresee rates going in that direction.

“I don’t think people are thinking it’s going to grow much,” she said. “That could happen, but I don’t think you’ll see interest rates above 7% again. I hope it will go and move around 6% or even lower.”