What lies ahead for the housing market?

updated 4:19 p.m. ET March 16, 2005

The story of Barbara Corcoran is the stuff of entrepreneurial lore. Three decades ago, she quit her waitress job, borrowed $1,000 from her boyfriend, and started a real estate shop that eventually blossomed into one of New York City's largest residential brokerages. It was worth an estimated $4 billion when Corcoran sold it to national giant NRT in 2001. But she retained the post of chairman and remains the public face — literally, on billboards — for a housing empire that now stretches from the canyons of Manhattan to the shores of Palm Beach, Fla.

So what does the Big Apple’s most famous real estate mogul not named Donald think of the market? BusinessWeek Online SmallBiz Editor Rod Kurtz recently spoke with Corcoran about what the future of the real estate market holds for brokers and buyers alike. Edited excerpts of their conversation follow:

Q: First things first — bubble or no bubble?

A: Of course there's no bubble. I think we're just getting started. But I don't expect anyone to believe me. There are so many more buyers than there are homes to sell. Bidding and overbidding are the norm of the day. So it's going to take a lot to slow this market. Even if it does — which I don't see the signs of — it will still slow down slowly. That's not what a bubble does.

I think the bubble theory is nothing more than an intellectual expression of people's typical worry that good times can't last forever. When your marriage is going well, you worry there's a problem on the horizon. I think it's more psychological than fact.

Q: So what's causing the shrinking supply and begging demand?

A: Seven out of 10 deals are going for asking price or above. I think it's a much scarier world that we live in. When kids are scared, where do they run? They run home. People are staying home more. I think it's really reassuring for people to know they own the walls around them.

People have also become more distrustful. People don't trust the government, they don't trust Corporate America, they don't trust the stock market. They trust their house. It's psychological. People like to feel they can control a little piece of their destiny.

Q: So what are some of the trends you're seeing?

A: People are buying their second or third homes, retirement homes, very early. They're saying, “Why not retire in 10 years and get my hands on something now?” I don't really believe a majority of those people move into them eventually, but they justify the purchase by saying, “I'll buy now, before this goes too far.”

In the last nine months or a year, I've seen a big uptick in that. There is also a change in that most people who previously didn't think they could buy a home for pure investment are now acting on it.

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