High mortgage rates and stubborn sellers are keeping the market frozen
The US housing market is still struggling, with high mortgage rates and limited inventory keeping both buyers and sellers in a stalemate, said real estate mogul and investor on Shark Tank Barbara Corcoran.
Despite a slight dip in mortgage rates – 30-year fixed loans recently dropped to 6.96%, the lowest in six weeks – Corcoran said that the decrease isn’t big enough to entice sellers back into the market.
“No-one wants to move, and [there are] fewer houses to choose from at higher rates,” Corcoran said on Mornings with Maria, “so it's difficult for homebuyers.”
"Mentally, it affects the housing market because people are waiting for very good news and coming down a tenth of a point is not really good news. It went from 7% to 6.9%," she said. "Psychologically, that makes a difference, but with interest rates remaining high, what it really causes is fewer houses on the market."
Sellers hold out for lower rates
One of the biggest obstacles in the current market, Corcoran explained, is sellers’ reluctance to lower their asking prices.
"I don't think it's in the nature of sellers to be realistic, honestly. Their house is always worth more," she said.
With many homeowners locked into low mortgage rates from previous years, they have little incentive to sell and take on a higher rate in today’s environment.
"I don't think prices will shake out at all. I think they'll hold out hoping interest rates will go down again. And what is it to them?" Corcoran added. "It's another six months. And a lot of the sellers have very low interest rates they don't want to give up."
Read next: Housing sentiment rises despite mounting affordability concerns
According to a December report from Redfin, more than half (54.5%) of homes on the market had been listed for over 60 days, indicating that buyers are hesitant to purchase at current price levels. Many of these homes are deemed too expensive, further contributing to the gridlock.
Luxury market stays hot
While most of the market is in a slowdown, Corcoran pointed out that one segment is still thriving: luxury real estate.
“I really like the luxury market. I hate to say it, but I’m very bullish on that, particularly in warm climates,” she said.
High-end properties are selling at nearly double the national average rate, driven by affluent buyers who are less impacted by mortgage rate fluctuations.
“All the rates… are going up almost double the national average. And that’s a pretty good report card,” Corcoran added.
The US housing market experienced a surge in activity during the pandemic, fueled by record-low interest rates and high demand. But soaring home prices and rising mortgage rates have since put homeownership out of reach for many Americans, leading to an affordability crisis and a slowdown in transactions.
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