In Corcoran's words, the settlement has resulted in "total confusion" across the real estate industry. She explains the change that requires brokers to create a written document outlining all the services they will provide for buyers, as well as the cost of each service, will make "a clear difference," but that's the only upside.
Corcoran notes that this ruling will not prompt home prices to come down, as sellers have "a one-time chance" to make profits on their house. She cites the housing inventory shortage as the reason why "prices have gone up despite everybody singing the blues," with prices continuing to rise due to the imbalance in supply and demand dynamics.
However, Corcoran advises that if you want to buy a house, the time is "right now." As people wait for rates to fall before entering the market, she warns that the optimal time will see "everybody in the market," and she questions, "Why would you wait for that?"
Well, Wall Street is now trying to gauge-- and Americans are really trying to gauge what the settlement will mean for homebuyers, what it means for some of the major players within the sector. Who better to talk to about this than Barbara Corcoran. She's joining us now at the desk founder. Of the Corcoran Group. Barbara, it's great to see you.
BARBARA CORCORAN: Thank you very much.
- So let's talk about this settlement. Your initial reaction to it, the disruption will it cause disruption throughout the industry?
BARBARA CORCORAN: I think a lot less than people expect it to. But what it is causing is total confusion. Brokers are confused, buyers and sellers are confused. I even think the people who made the amendments are confused. But they're really only basically two changes that do make a difference.
Not a tremendous difference but a clear difference. One is if you're a buyer in the market and you want to hire a broker to represent you, to find you a house, it now has to be in writing exactly what they're going to do for you and exactly what each service is going to charge, OK? What they will charge you for each service.
So this clarity. And I think that's very good for the buyers. That they have clarity. But it's not so good for the buyers because if the seller doesn't want to pay like days of old sandwiched into the commission, they have to take it out of their pocket. And buyers, I know, don't like to pay for things out of their own pocket.
- I wonder too if sellers are going to find other ways to increase fees so that it doesn't necessarily lead to-- or brokers rather, are going to find a way to increase fees and commissions so that there's not that big of an impact.
BARBARA CORCORAN: I think that's going to happen. I think particularly, the sellers will step up to the plate because you have to remember sellers want buyers coming in. The more buyers that come in the house, the better the price they get basically. So they're going to find a way to make good with the buyers, whether it be paying for closing costs or any myriad of things that they can do. But it will even the score out. So I don't think the ruling is a big deal honestly. But the confusion it's causing is amazing.
- So Barbara, you mentioned confusion. And I think a lot of people are confused, me included, about what this is going to do to the price of homes. Because you have the argument out there that if you're not paying for a fee here, an agent fee then it makes more sense for the home seller. Maybe they could list their home a little bit more. Maybe they'll list it less because they're not having to deal with those fees.
Then you also have the other side of the argument where this could actually attract more people into potentially buying a home and get them off the sidelines here, if we do see a drop in fees. What's the ultimate impact on home prices?
BARBARA CORCORAN: I don't really believe either of those things are going to happen. It's a neutral. Think of yourself. If you're selling your home, and if you-- let's say you save 3% with the new ruling and say, I don't want to pay the buyer's broker and the extra 3%. Do you think you're going to pass that along to the buyer, which a lot of people are saying is the case?
No. Sellers are greedy. It's a one time chance to get the most for your house and you're not going to give that money away. So if you think prices are going to come down definitely not the case. There are such a shortage of houses right now. The prices have gone up despite everybody's singing the blues 9% this year, pardon me. 6% this year. How did that happen? It happened simply because the supply and demand. There's a lot of buyers and not enough houses to be available. And that's what rules the market.
- Do you see prices continuing that move to the upside?
BARBARA CORCORAN: I think the prices are going to go through the roof, especially if interest rates come down another point by year end. I think everybody and their mother and their in-laws is going to come out looking for a new house. And the competition is going to be so fierce that house prices will have to go up.
- So when should people be buying?
BARBARA CORCORAN: Right now. But that's always my mantra. Always the best time to buy. Not because I'm an ex real estate broker by any means, but I'm sure I'm biased in my attitude toward it. But it always is true that the minute you go out in the marketplace when everybody else is out, you always pay more. Why would you wait for that?
- Barbara, a real driver here when we talk about the pricing of homes. Why they have risen so dramatically has been because of inventory, that lack of inventory.
BARBARA CORCORAN: Definitely.
- There has been lots of questions about what it's going to take in order to unlock more inventory, what the ultimate impact is going to be on the housing market. Do you see the inventory picture getting fundamentally better anytime soon?
BARBARA CORCORAN: It's gotten a little bit better. Maybe to the tune of 4% more inventory a month in the last three months. But no. There's such a shortage of houses. I don't see how that's going to change. The biggest problem, again, is interest rates. People who own homes have 3%, 4%. Some of them even 2%. Mortgages, they don't want to give those up. That's why you have the bottleneck right now. That's why people aren't leaving their homes.
- Is it still true that you can buy the house and then date the rate and you can refinance? Is that true in kind of a higher for longer environment?
BARBARA CORCORAN: You can. But it makes people feel good more than it makes a difference.
- OK.
- Barbara, your advice to maybe people who are sitting on the sidelines? They haven't listed their home. They're a little bit nervous given the fact that we've seen that dramatic run up in rates. What do you think is going to be the key factor to prompt them? Is it mortgage rates below 6%? Or do you think even some improvement from where we've plateaued just below 7% is enough to move some of that inventory?
BARBARA CORCORAN: If it goes to 6%, people are going to get so much more for their houses. Why would they even think of selling? If it hovers somewhere in the 7%, the market is going to be so active and they're going to get more for their houses too. So it's a hard argument to convince a seller now is the time to sell. Life changes make it necessary for people to sell. But when it's optional, nobody's putting their house on the market.
- I'm curious about your advice for first time home buyers, obviously, impacted by this settlement. But also a lot of people have just said, I'm going to give up. I'm just going to rent forever. Should people still have the goal of owning a home someday?
BARBARA CORCORAN: Well, first I'll say that rents are cheaper anywhere in the United States than buying. So logic would dictate, sure. Why not rent? It's cheaper. But everybody, almost everybody has this idea that the American dream is still owning your own home. But for the first-time buyer, they're the hardest hit. They have to compete the hardest, have the least amount of cash to compete-- so they're not making cash offers. And they're losing 4/5 houses that they're interested in. I would not want to be a first-time buyer. I don't know what's really going to give there, but it's not going to be easy.
- Any advice then for the first-time buyer, Barbara? Help me.
BARBARA CORCORAN: I must sound depressing today, don't I? Yes. Here's good advice. Do what I did for the last four houses now. People might say, well, I don't have her money. That's true. But I've done this my whole life. Run into a community, see which houses you like, and leave love notes on every door.
- And that's worked?
BARBARA CORCORAN: Yeah. You're allowed to leave a note. I love your house. It reminds me of my grandmother's house where I grew up in. The wallpaper, I noticed-- or the garden or whatever. Trim it up. Leave him a note. The last four houses I built were not on the-- that I bought were not on the market. I just picked out the house I liked best and eventually the people called.
- That's some great advice.
- I love that advice.
- Yeah.
BARBARA CORCORAN: I think Sellers are going to kill us. They're going to get a lot of notes,
- Yeah.
- Hey. They're love notes. You can't be too unhappy. Barbara, thank you so much.
BARBARA CORCORAN: My pleasure.
- Really appreciate you joining us.
BARBARA CORCORAN: I hope I wasn't too negative today.
- Hey. You got the pink--
- You're a realist.
BARBARA CORCORAN: OK.
- Exactly. Thank you so, so much. We appreciate it.
