For those who are looking to renovate, Corcoran says it's still a good time to do that too because the cost of materials has come down. "The problem is finding a contractor. Contractors are busier than anyone else on earth," Corocoran told Yahoo Finance. When it comes to the type of renovation, Corcoran's tips include: make sure your house has the curb appeal you want and buy a new refrigerator, because potential buyers "always open the fridge."
You can't keep that up. You can't pay your banker, you can't pay off the loan if your tenants aren't occupying the spaces. So everyone who's saying there's not a problem there is not being truthful. We have problems looming.
- Barbara, what's a ripple effect from that? Just in terms of the impact on the economy and the impact, really, more broadly, on commercial real estate.
- Well, more broadly on commercial real estate, it should make people slow down to build commercial real estate. But those commitments have been out for like three years, so those buildings are going to happen.
So far as other-- probably the biggest problem with the commercial meltdown, to use your word, which I wouldn't call it that myself, is the banks. The banks aren't going to be paid. The banks we're speaking about are regional banks, they can't afford not to be paid. And so we're going to see some banking problems. More banking problems.
- Let's talk about what's going on within housing right now, when it comes to the residential side of things. Higher mortgage rates, obviously, has kept many buyers on the sideline. What do you make of the current environment right now?
BARBARA CORCORAN: Well, it's a choppy environment and a nervous one, and it shouldn't be. I think people are coming to the wrong conclusions on buying a home right now. I think it's the absolute best time to buy a home for a couple of reasons.
One, interest rates will come down again. And if you buy it now, you can refinance. And also, if you wait until interest rates come down, even by a point and a half, I think all hell is going to break loose. Everybody will come charging the market, and you'll be paying another 10% for the house.
So there's nothing, in my logic, that says it makes sense to wait. You ought to jump in now and get the house where you can when there's less competition, and it's still very competitive.
- What does the timeline look like on that? Just in terms of rates dropping and the housing prices potentially jumping 10%.
BARBARA CORCORAN: Well, the minute rates come down, who knows what's going to happen? We've had 11 increases in a row, and people are anticipating the rates will be kept steady, or possibly come down. But the minute it comes down substantially, like north of one point, everybody's going to charge the market. That's the timetable on the whole thing.
- When it comes to those first-time homebuyers, many of them have been on the sidelines because they simply cannot afford the houses right now. When it comes to home affordability, do you see any improvement along those lines? Or what's that going to take in order to see improvement with that situation?
BARBARA CORCORAN: Well what dictates first-time homebuyers, which is the inception of any market cycle, is, really, jobs. And there's been tremendous job growth, there's been very little unemployment. I think there was a survey I was reading last week where they said, the typical homebuyer is spending another 15% of their income on housing right now to keep up with it.
No, I think we have a lot of growth. I think it's very hard to get into the market for the first time. And 2/3 out of all the purchases are all cash, you know that. So it's the rich people are buying now. But I think when interest rates come down again, the middle class people, who want to get their first house, will jump into the market with fervor.
- What are the most attractive markets right now? If you had to name a top three place to buy, what would those locations be?
BARBARA CORCORAN: As a house?
- As a house, yes.
BARBARA CORCORAN: Well, I would have to say Manhattan first. But--
- You gotta.
BARBARA CORCORAN: But the Manhattan market has just ticked up. But most people don't believe that's the best place to buy. I think Pittsburgh is a phenomenal market to be buying in. Prices are up about 20% a year.
The youth is coming in, they have the most educated population, people are real estate friendly, there's new development. You can pretty much live very well in Pittsburgh today, which you can't in New York, if you're a middle-priced worker.
- How do you see-- with more and more people working from home, that has certainly had a massive impact on real estate, where people are buying. We've seen popularity in the South and the Sunbelt region. How much of that has to do with the remote work? And what do you make of that trend? As a business leader, as an investor.
BARBARA CORCORAN: That's not going to go away. I mean, the young people will not come to work full time, unless you want to settle for less good young people. If I want to hire for a new position, the first priority is, can I work from home? And we have a hybrid model. Sure, you work from home as long as you get it done.
Any employer who doesn't have that attitude toward young workers isn't going to get premium workers. It's just the way it is. So that's not going away.
- Let's talk about renovations. We know so many people were renovating their home during the pandemic, if they weren't out there looking to relocate. Is now still a good time to make that home renovation?
BARBARA CORCORAN: Yeah, because prices are coming down. Lumber has come down, you can get the supplies you need. There was a period where you couldn't even renovate no matter how much money you had because you couldn't get the supplies. That has totally changed.
The problem is finding a contractor. Contractors are busier than anyone else on earth. So if you find a contractor who would take your job, you're in luck.
- And if you're making that home renovation, what's your top tip? What should people be considering when they are making that decision.
BARBARA CORCORAN: Make sure you have the curb appeal you want. And the curb appeal today happens online. So when you have that first beauty shot of the house, it's got to be in the best season, the best look. Even if you paint it in, you paint in the bushes, whatever you have to do, make sure it looks like somebody wants to come and get another peek.
And once you get into the house, the two best improvements are improve on the size of your living room rug, because people will judge the size of your living room based on the rug. And the second thing is make sure you buy a new refrigerator. They will not open the stove, they will not really open your cabinets, but they always open the regrigerator.
- So buy a new refrigerator?
BARBARA CORCORAN: Yeah, of course. It's worth spending a lot of money.
- We're sitting right here in New York City, an area that has a massive amount of empty buildings, office spaces that simply are not being used. What's going to happen to that?
BARBARA CORCORAN: Well, the Class-B buildings have smaller office plates, and they have more window space. So they can be converted to co-ops. Nobody's done them yet but I can't imagine that not going to happen.
The cities don't stay in the way of that, they want to see the redevelopment. But the Class-A buildings of 25 years ago in Park and Fifth Avenue, the best buildings in town, they have a problem. They really have a problem.
Because they can convert to any kind of a loft space because the huge plates, they don't have the window space. You have to have windows to convert to residential. I don't know what's going to happen with them. Your guess is as good as mine.
- Barbara, what's the best way to play the commercial real estate market right now? I think a lot of investors are at home asking maybe now's the time to get in. Where are the best opportunities, given the outperformance of some of the asset classes within commercial real estate. What do you think?
BARBARA CORCORAN: Well, you know, commercial isn't just office space, which everyone thinks of it as. I think the industrial sector is booming right now. And you can't get in cheap, but you can make a lot of money. Retail space, you get in cheap and you can make a lot of money. And multifamily housing is doing so well. So I would say those three areas versus the office market is the right place to buy right now.
- When it comes to retail real estate, I think that has a lot of people scratching their heads, just in terms of the fact that so many people, during the pandemic, were spending online, weren't going to stores. But shopping centers, have really been able to attract those consumers back. What do you think the trick is?
BARBARA CORCORAN: The trick is that people like to touch and feel and smell what they're buying. People want to get out and see what they can buy with their hands. It doesn't mean that it diminishes the ability to order online, but the retail sector has come back-- at a lower price-- but it's come back definitely because people want to shop.
