According to a leading industry expert, while the housing market is no stranger to volatility, it could rebound in the residential sector, while the commercial market remains in a troubled position.
Barbara Corcoran, on Wednesday’s “The Claman Countdown”, said: “The residential market is beginning to recover.” “But the commercial’s in trouble.”
The Corcoran Group’s founder and “Shark Tank “star, Corcoran, echoed Michelle Bowman’s analysis that the residential real estate markets appear to be “rebounding.” Bowman said that although lower rents would eventually reflect in inflation data, the home price level is now being reached.
Elon Musk, CEO of Tesla, offered a different perspective. He said that the residential real-estate market will follow the commercial real-estate meltdown.
Corcoran stated that while the residential housing market is currently in a “Mexican Standoff,” there are changes occurring which fuel an optimistic outlook.
She said, “There is a Mexican standoff happening but the situation is changing.” “Those who go out and buy are finding that they are overbuilding. The house is hard to get. Right now, everyone is afraid of high interest rates. “But the moment those interest rates drop, prices will go through the roof and all hell will break loose.”
Bankrate data shows that the 30-year fixed rate mortgage rose from 6.88% to 7.13% between March 2023 and May 2023. Corcoran says that home buyers and sellers “stay put” to get the lowest rates. She predicts that once rates fall, people will return to the residential market and “buy like mad.”
“I would not say that the house prices have increased by 20%, but I wouldn’t put it on the housing market.” She said, “We could have COVID again.”
The bottleneck is what’s holding the market back. The sellers don’t move out of their home or apartment because they do not want to pay higher interest rates. “Buyers are afraid of getting less property,” Corcoran said.
The real estate magnate said that buyers often get about half of the house they got two years ago.
Corcoran, while expressing optimism for the residential market, warned that the commercial sector is in the midst of a “bloodbath.”
“It is great that you can get pennies on a dollar, but nobody has the confidence to purchase now.” “No one believes that it will turn around,” Corcoran said. “I don’t see it turning around.” “I think there’s going be a little bloodbath until things improve.”
According to Corcoran’s analysis, the changing dynamic of the workplace is one of the major reasons why commercial real estate has struggled. Commercial office buildings have experienced a drastic decrease in occupancy since the pandemic revolutionized hybrid and remote schedules.
“People are staying at home. In midtown Manhattan, our best office buildings are 50% full, while in other major cities and secondary cities we have a vacancy rate of 20%. “No one would take that risk,” she said.
She also noted that when the industry is struggling, banks “will take it in their gut”.
All the banks have funded it, including the regional banks and small banks. Many of these funds are now in the market, but they’re behind on their mortgage payments. “That’s not good,” she said.
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Corcoran stated that regional banks will be “in trouble”, as they often write commercial real estate loan. The commercial market’s struggles, as well as the banking industry’s fears following several bank failures, will cause further problems.
When you look at their portfolios they have about 25% of their assets as commercial real estate. You cannot continue to operate with such a blow. They’ll be in serious trouble. “It’s a certainty,” she concluded.
Corcoran, despite her concerns, argued that the residential market would likely rebound and not follow the same pattern as the commercial market.