Exclusive: Rocket CEO says housing isn’t a buyer’s or a seller’s market. Now it’s even
Covid-19 set off an epic housing boom that left first-time homebuyers feeling desperate amid relentless bidding wars and all-cash offers.
Jay Farner, who presides over America’s largest mortgage lender Rocket Mortgage, says the days of sellers holding all the power are over.
“Those moments of…there are 20 offers coming in are gone now. Buyers can take a bit more time,” Farner, the CEO of Rocket Companies, told CNN in an exclusive interview. “The buyer has a little bit more power or control on their side.”
Hurt by the spike in mortgage rates, home sales dropped in November for the 10th month in a row, the longest slump since at least 1999.
But the Rocket CEO isn’t prepared to declare this a buyer’s market, at least not yet, because inventories remain historically low.
“I’d say it’s an even market,” Farner said. “A few years ago, it was clearly a seller’s market. We were doing verified approvals, people were getting a full underwrite within 24 hours to ensure they could present almost like a cash buyer to make an offer on that home. Now, they have a bit more time. They have more homes they can look at…. We’re not seeing 15 offers on one home.”
Where will home prices go?
In recent months, home prices have cooled off from their blockbuster gains in 2020 and 2021.
But Farner doesn’t expect home prices to plunge. He pointed to the fact that relatively high mortgage rates have caused homeowners thinking about selling to hit pause.
“As demand decreases, we also see supply decrease,” Farner said. If that continues, he said, “then we’ll probably see a pretty soft landing here on home prices, meaning home prices remain similar to where they are today.”
The housing boom that began in 2020 was driven in part by rock-bottom mortgage rates as the Federal Reserve slashed interest rates to near-zero to revive the economy.
Now, the opposite has happened. High inflation has prompted the Fed to rapidly raise borrowing costs, a 180 that has hit the housing market the hardest.
The 30-year fixed-rate mortgage averaged 6.33% in the week ending January 12, according to Freddie Mac. That’s down from 7.08% last fall but well above 3.45% from a year ago.
Asked if the worst is over for mortgage rates, Farner expressed cautious optimism.
“I would say we’ve settled into what would be the high side of mortgage interest rates over the course of the next six to 12 months,” he said, adding that there is a lot of uncertainty and variables here.
Nervous Americans are canceling subscriptions to save money
Although some economists and business leaders are growing more hopeful about a soft landing in the US economy as inflation has cooled, the Rocket CEO is worried about a downturn.
The Rocket CEO is less optimistic about the direction of the overall economy.
“A recession here is on the horizon,” Farner said.
He pointed to businesses pulling back on spending, slowing job growth and emerging signs of trouble for consumers.
Rocket Money, a budgeting app run by Rocket Companies, has revealed trends that point to consumer stress.
The number of Rocket Money users canceling subscriptions increased by 50% year-over-year in the third quarter of 2022, according to data shared with CNN. Monthly spending on personal care and wellness has also been “steadily decreasing” among Rocket Money users, Rocket Companies said.
“People are changing their spending habits, credit card debt is rising, savings and bank accounts are dropping,” Farner said. “All of those things tell me that we’ve set the table for a recession here in 2023.”
Debt ceiling looms
The central question remains whether the Fed can stop raising borrowing costs before it slows the economy into a downturn.
“If the Fed continues … being hawkish then I think we could have a steeper recession. And that wouldn’t be good for anybody,” Farner said.
The chaotic election of House Speaker Kevin McCarthy earlier this month has shined a bright light on the risk of a crisis later this year when Congress must raise the debt ceiling to avoid a disastrous default.
Asked if he’s worried about a major debt ceiling crisis, Farner pointed to history as a guide.
“All I can do is look in the past and know that while there may be some tension, there may be some friction,” he said, “it appears that one way or another they find a way to get that done and we continue to move forward as a country.”
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