4 Reasons Barbara Corcoran Is Probably Right About Housing Prices Going “Through the Roof"

Housing costs are an issue everyone is concerned about. Although it's difficult to predict the future confidently, expert opinions on the housing market's future can give us some idea of where things are heading.

Shark Tank personality and successful real estate investor Barbara Corcoran predicts housing prices will soar if mortgage rates drop.

Whether you're already a homeowner or want to buy a house in the future, monitoring housing prices is a smart money move. We explore Barbara Corcoran's housing market predictions and why she might be right.

In a recent interview with FOX Business, Corcoran was asked about the future of the housing market and the impact of interest rates.

"I can't explain the rates going up or down — that's not my bailiwick," said Corcoran. "But what I can explain is if rates go down, just another percentage point, that's what I'm hoping for, prices are going to go through the roof."

Essentially, she predicts that prospective homebuyers who are waiting in the wings will jump back into the market when interest rates fall. After all, lower interest rates mean buyers can potentially afford more home for their dollars.

"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 said. "I wouldn't be surprised if real estate went up by another 8% or 10% if interest rates come down a full point."

Of course, everyone has an opinion. But the consensus is that Corcoran's predictions are spot on.

"Lower interest rates make borrowing more affordable, bringing more buyers into the market," says Kevin Daniels, owner of Palm State Home Buyers, a real estate flipping company.

"When mortgage rates drop, monthly payments become more manageable, allowing buyers who may have previously hesitated to enter the market. The increase in demand from these newly eligible buyers often leads to price hikes, especially in areas with limited housing supply."

Daniels continues, "Additionally, a lower interest rate environment can increase the buying power of existing buyers. Even a slight reduction in rates can mean a significant difference in affordability, enabling buyers to consider higher-priced homes or outbid competitors."

"This buying power fuels competition, pushing prices upward as buyers are willing to pay more for desirable properties."

A small change in interest rates can have a major impact on home affordability when it comes to financing a home purchase.

For example, the monthly payment attached to a 30-year fixed-rate loan for $300,000 with a 7% interest rate is $1,996. But if the interest rate drops to 6%, the monthly payment is $1,799.

Although the interest rate change might seem small, it could help buyers save hundreds of dollars per month on the same loan amount. Given these numbers, prospective buyers would likely pour back into the market when interest rates drop.

If more buyers jump back into the housing market when interest rates drop, the demand for houses will increase. However, since the supply of houses likely won't change too much, the basic rules of supply and demand indicate housing prices will climb.

Generally, when interest rates drop, housing prices rise. The trend has held throughout many periods of falling interest rates.

We saw an extreme case of this trend in 2020 and 2021 when historically low interest rates encouraged many home buyers to enter the housing market.

During that period, housing prices soared as buyers competed with each other to find a place to call home. In fact, housing prices climbed by 17% in 2021.

Although Corcoran's prediction is in line with past trends, it's truly impossible to predict the future.

"Barbara's perspective aligns with historical trends," says Samantha Sousa, a real estate broker in California.

"However, buyers are fatigued due to high interest rates, covering their own closing costs, and the struggle to save for a down payment. Housing prices have also risen more rapidly than wages, making it difficult for first-time buyers to purchase without existing equity."

Sousua continues, "High rental costs make it even more difficult for first-time buyers to save for a down payment. So, a reduction in interest rates could boost pricing in the short-term."

"I don't think it will be sustained unless the economy and inflation improves, or there is a change in seller mentality to agree to more buyer concessions."

Corcoran's prediction that housing prices will rise if interest rates fall is likely to come true. When interest rates drop, home buyers can stretch their purchasing power further and will likely jump into the market.

As you navigate the housing market, consider protecting your wealth against the market's ebbs and flows to achieve greater financial stability.