In a recent interview on Yahoo Finance Live, renowned real estate mogul Barbara Corcoran cautioned homebuyers about the potential consequences of waiting for lower borrowing costs. Corcoran's warning comes as the rate on the benchmark 30-year fixed mortgage dropped slightly to 6.79% last week, well below the peak of 7.79% observed in October, according to Freddie Mac.

While the prospect of lower interest rates may seem enticing to potential buyers, Corcoran highlighted the possibility of increased competition in the market, leading to a surge in already soaring home prices. In fact, January witnessed a record pace of home price growth as more buyers emerged from the sidelines, resulting in intense bidding wars that often drive prices even higher.

Data from the National Association of Realtors (NAR) revealed that during the first month of the year, the typical seller received an average of 2.7 offers, with 16% of homes being sold above the asking price. A key contributing factor to this ongoing trend is the severe shortage of housing inventory. Since 2005, existing home sales hit their lowest level in 2023, as homeowners with locked-in low mortgage rates chose to stay put.

Corcoran emphasized, "There is such a shortage of houses right now, so prices have gone up despite everybody singing the blues. It happened simply because there are a lot of buyers and not enough houses available."

Encouragingly, there are signs of improvement in supply. February saw a 3.8% increase in new listings, reaching the highest level in 17 months. Additionally, the total supply of homes for sale rose to the highest level in a year, according to data from Redfin. This suggests that buyers and sellers are gradually adapting to higher mortgage rates, creating a more balanced market.

Lawrence Yun, NAR's chief economist, indicated that "More people are adjusting to the new normal for mortgage rates, which appears to be between 6% and 7%." He added, "There is a sizable group of delayed sellers who have been postponing, and they will begin to list their property."

While the increase in new listings brings good news for buyers, top economist Mark Zandi cautioned that a significant improvement in inventory may take time. Zandi predicts that the housing market's recovery will unfold over the course of several years. He stated, "Everything indicates [the 30-year mortgage rate] will likely go to 6% rather than 8%, and if that's the case, we should start to see improvement, but this is a process."

In light of these factors, Corcoran advised potential homebuyers not to wait for further declines in mortgage rates or an increase in housing inventory. She emphasized that "right now" is always the best time to buy. To gain a competitive edge in a tight market, Corcoran suggested writing personalized "love letters" to the owners of desired homes, even if they are not currently for sale. Corcoran attested to the success of this approach, sharing that the last four houses she purchased were not even on the market initially.

As the housing market continues to navigate the effects of fluctuating mortgage rates and limited inventory, prospective buyers are encouraged to act decisively. While inventory slowly improves and mortgage rates hover within a new range, real estate experts advise seizing favorable opportunities as they arise.