Barbara Corcoran's advice to first-time homebuyers: 'Get in the game'
As mortgage rates continue to rise as the Federal Reserve raises interest rates, what should aspiring first-time homebuyers do?
"I think you have to get in the game," Barbara Corcoran told Yahoo Finance (video above). "You have to get in with whatever house you can possibly buy, so you have a chip to play in the game and trade up and trade up and trade up. And that becomes a retirement fund."
The real estate mogul and "Shark Tank" investor added that buyers "really can't sharpshoot a real estate market. You can kind of get close, but what you have to do is answer your family's needs. And people just like to own where they live, hang a picture on their wall, not the landlord's wall. There's somewhat psychic gain also in owning. ... I just think it still is the American dream."
As for the state of the housing market overall, Corcoran acknowledged that it's red hot.
"You can't predict the future, but my own feeling in all of my years of real estate is that the market is over-inflated — ask any new homebuyer if they think they are paying the right price for a house," she said. "It just keeps running away and getting higher and higher, but the demand is so much far exceeding how many houses are out to go around. I think we're going to have a needed softening in the market, meaning prices aren't going to go up as fast, if you could call that a softening."
In a slight reprieve for U.S. buyers, mortgage rates posted their biggest drop in more than two years last week, sinking from 5.25% to 5.10%.
But rates are still well above the 3.11% level seen at the end of last year — and it's beginning to take a toll on new home purchases as new home sales fell for the fourth straight month in April.
The sales miss added to a host of other recent metrics showing that the once-blistering hot housing market is starting to cool as many homebuyers are priced out by sky-high borrowing costs.
The slowing market "is good in a way because I don't want prices to come down — they're not going to — but it gives more people an opportunity to catch up with the market, catch up with themselves, maybe buy their first house," Corcoran said. "So I see it as a tempering is kind of good. Nobody likes high interest rates. It costs you more to buy a house, but it's going to keep things a little bit more normal."
When it comes to which markets and cities Corcoran has her eye on, the investor said "the boom has been in every city" while the South has seen a particularly strong surge in demand.
"But there isn't a single market that I would point to, saying it has a much better chance, because the one thing when you buy into a market that's the highest market: It comes down the fastest, too, or it simmers down the fastest," she added. "So I think you should buy where you most want to live. I think that's a great guide as to where you should buy. You don't approach buying a home like an investor. It's not about that. It's about buying a home for your family."
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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