The Expert Opinion: Barbara Corcoran on the Future of Housing Prices

Barbara Corcoran is an award-winning New York City real estate mogul and star of ABC's Shark Tank series. As a much sought-after speaker, Barbara will join Vistage for a discussion about leadership strategies to ensure success in today's complex housing market.

Corcoran believes that buyers will return in force once interest rates decrease by two percentage points; she estimates this scenario as being crucial.

1. We’re not in a bubble

Real estate has long been the source of drama and controversy. People are eager to hear what experts have to say on this topic -- especially when those experts include famous figures. Not all experts are created equal: some may be more reliable than others and there are certain rules that must be observed for an admissible expert opinion to be provided by them.

Elon Musk recently made headlines for his dire warnings of imminent collapse of the commercial real estate market, but another expert isn't buying into these sentiments. Last week, "Shark Tank" investor Barbara Corcoran addressed this topic and dispelled any concerns of a US housing price bubble.

A bubble, in this sense, refers to periods during which high demand and easy credit drive house prices beyond what market fundamentals would suggest is sustainable. This can cause prices to quickly increase before finally leading to a burst that deflates it and sends prices plummeting; often leaving homeowners struggling to recover financially afterward.

Some experts, like Wharton professor Jeremy Siegel, have warned of an imminent financial bubble, citing rising debt costs and reduced real estate investment as indicators of this fact. Meanwhile, others like Selma Hepp from CoreLogic argue that risk of bubble is lessening as mortgage rates continue to increase and more people take out longer-term loans.

Moody's Analytics Chief Economist Mark Zandi notes that for any bubble to form, both overvaluation and speculation must drive prices higher. Although he sees overvaluation in the housing market at present, it doesn't appear driven by speculation at this time; rising mortgage rates will eventually drive buyers out and lead to price decreases in various cities more rapidly than others.

2. We’re not overleveraged

Barbara Corcoran has become one of the industry's premier real estate moguls by always being ahead of her competitors in technology use. She used videos to showcase apartments long before any competitor, built and advertised a real estate website five years before any competition, and even used social media as the first way to connect with potential buyers. "I've learned you must keep up with technology and be flexible enough to change," said Barbara.

Corcoran remains optimistic regarding residential real estate prices; however, she cautions that commercial markets could be headed for trouble. She told Fox Business that commercial properties financed through regional banks "will get in trouble."

Reason being, an increasing number of commercial vacancies have been cropping up across the country and buyers aren't rushing in to snap them up quickly enough. According to data from real estate firm JLL, office vacancy levels hit 20% for Q4 2022 -- their highest point since 2009.

Corcoran pointed to a "chicken and egg" issue as the source of lack of buyer enthusiasm: sellers fearing higher mortgage rates prevent them from moving, while buyers worry that smaller spaces won't fit within their budgets. She predicted that as interest rates do rise, buyers will become even less interested in entering the market.

Corcoran remains confident that the housing market will remain vibrant this summer and even encouraged one Good Morning America viewer to purchase a home despite rising interest rates.

Others in the real estate world do not share her optimism. Wharton professor Jeremy Siegel warned that US house prices will likely decline as rising interest rates discourage prospective homebuyers. HqO CEO and co-founder Chase Garbarino predicted that an imminent debt deal is likely to produce further slowing of the housing market - higher interest rates can reduce mortgage sizes that people can afford and encourage saving over spending.

3. We’re not in a recession

Even amid all of the warning signs -- including skyrocketing interest rates, an uneven economy and the end of bidding wars -- some remain optimistic that we aren't at a point where all hope has been lost. A survey released this week by Morning Consult found that 41% of Americans are taking proactive steps in preparation of recession such as increasing savings accounts, cutting spending or stockpiling food and supplies.

Barbara Corcoran, one of the many real estate moguls and Shark Tank star Barbara Corcoran who have raised alarm about the current housing market are sounding the alarm bells. Corcoran appeared this week on Good Morning America to discuss everything from when and how to buy homes to winning bidding wars, warning that "you will soon witness a crash in the housing market".

While many experts recognize the telltale signs of impending recession, not all economists agree with that assessment. Economic output often dips during a recession; data due out this week may demonstrate this and indicate GDP declined during Q2 2023.

However, economic stagnation can be difficult on families - something we're currently witnessing with rising cost of goods and services outpacing hourly wages, straining household budgets. Consumer confidence remains low while job creation remains stagnant.

While some of this may be temporary, it's essential to keep in mind that recessions don't just impact job losses and price decreases; they have far-reaching ramifications on the broader economy as a whole. That's why it's crucial to look at numbers rather than be distracted by headlines warning of imminent disaster.

4. We’re not in a bubble

A burst in the housing bubble would be devastating news for anyone owning or financing a home. It would wreak havoc on both the economy and global financial system, leading to massive recession that could cost trillions of dollars in lost wealth for nations worldwide. Furthermore, it would cause massive foreclosures that result in lost jobs while uprooting millions of families from their homes and lives.

Even amid all the upheaval in the market, there doesn't appear to be any sign that we are entering an "inflated bubble." As Black Knight notes, current levels of inflation and household wealth indicate that Americans can still afford houses they want.

That represents a dramatic contrast to the last housing bubble, which was propelled by easy credit available to people who couldn't afford it, leading to its collapse costing trillions of dollars and leaving many homeowners without anything tangible to show for their investments, including houses they had worked so hard for over time.

Corcoran of Shark Tank fame advises prospective buyers to act quickly. She states that only interest rates, which have reached their highest point since 2002, are holding up sales; once rates drop back down again, buyers will return in droves.

She suggests that the current situation resembles a Dutch "chicken and egg" riddle: sellers fear listing their homes for sale for fear of finding another suitable living arrangement; buyers don't feel ready to make purchases due to high prices and interest rates that remain too high; thus prompting people to postpone moving. According to Ms. Lapinsky's analysis, an interest rate reduction by two points might spur more people into action.

Corcoran's advice may seem risky to newcomers to the market, but she is far from being alone in believing now is the time to purchase. Notable investment strategist Toru Yoshikawa who has lived through both stock and housing bubbles believes similarly that this market will experience continued gains.