Barbara Corcoran: 3 Reasons We’re Not in a Real Estate Bubble
Written by
Laura Bogart
Edited by
Kristen Mae
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Searching for a home can feel like a crash course in a host of subjects at once, from contracting to decor to finance. If you’ve felt a little dizzy at all the terms you had to learn, nobody would blame you. One of the most common phrases potential home buyers hear is “housing bubble” or “real estate bubble” — often in a headline, paired with a sense of urgency or doom.
So what is a real estate bubble? Simply put, it’s a rapid swelling of home prices beyond what is sustainable, usually driven by surging demand and limited supply, not to mention good old-fashioned social and emotional pressures to buy. That sounds decidedly unfun for buyers.
If anyone knows the ins and outs of the housing market, it’s Barara Corcoran, founder of the Corcoran Group and star of “Shark Tank.” She built her name — and much of her wealth — in real estate. Her advice? Take a deep breath. According to Corcoran, we’re not in a real estate bubble.
Most Home Buyers Aren’t Investors
In an interview with Neil Cavuto of “Cavuto: Coast to Coast,” Corcoran addressed concerns about potential real estate bubbles in some of the country’s hottest markets. She assured him that current conditions are “nothing like the last bubble” of the early 2000s, which was fueled in part by investors snapping up properties to flip them.
Whether it’s their first, second, or even third home, most of today’s buyers are planning to live in the houses they purchase. Corcoran estimates that only about 3% of buyers in today’s market are investors — a significant drop compared to the investor activity during the last housing bubble.
Economic Conditions Are Different
While the specter of the 2008 crash looms heavily in the minds of anyone participating in the market, Corcoran has reminded people that some key economic conditions that contributed to the bursting bubble in 2008 aren’t present today. One major difference? The subprime mortgage crisis.
“People [have] their hard-earned cash in the market — people aren’t overleveraged,” she said. “There’s really no comparison to now compared to what came before.”
Houses Are Staying on the Market Longer
When Corcoran watches the market, she’s keyed into one metric: the percentage of houses going into overbid, where properties go for more than their original asking price. She told Cavuto that last year, 25% of homes were in overbid. This year, that figure is down to 22%.
Corcoran noted that homes are staying on the market hardly long enough for buyers to snap them up. However, she added that the trend isn’t cause for alarm. “When houses go to overbid, you’re a long distance from a bubble.”
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