Not only did rock bottom interest rates during the pandemic spur a refinancing bonanza, but with the help of remote work and tight inventory, they also heated up the housing market in a way that hadn’t been seen since the bubble. Borrowers simply couldn’t pass up on 30-year fixed mortgages with a rate of 3%—or in some cases 2%. Few companies, of course, benefited more from that housing boom than Rocket Companies, which during the roughest part of the lockdowns did $5 billion in sales in the second quarter of 2020 compared to $1.6 billion in the same quarter in 2019.
Rocket Companies, the parent of Rocket Mortgage (formerly known as Quicken Loans), has clearly taken the biggest hit among the four real estate titans that dropped off the Fortune 500 list (a list of the 500 biggest publicly traded U.S. companies by revenue). Over the past year, Rocket Companies’ revenue has fallen -54%, compared to -24% at Zillow, -6% at Compass, and -14% at Anywhere Real Estate.
Rocket Mortgage, which has been hard hit by the decline in the purchase and refi markets, hasn’t just given up its pandemic sales gains—it has even fallen below its pre-pandemic revenue figures (see chart above). Not to mention, it’s losing money right now, including a $493 million loss in Q4 2022 followed by a $411 million loss in Q1 2023.
In order to juice sales, Rocket Mortgage recently went as far as to underwrite a mortgage product that requires qualified and eligible mortgage borrowers to only put down 1%. That type of creative lending speaks to how challenging this macro environment is right now for mortgage lenders.
Of course, there are some bright spots for housing. Major homebuilders like Lennar, which climbed 12 spots on the Fortune 500 to No. 119, and D.R. Horton, which climbed 4 spots to No. 120, have seen their business outlooks improve. PulteGroup (No. 259), NVR (No. 376), and Toll Brothers (No. 382) also climbed up a few spots this year.
While activity levels in the existing/resale housing market remain frozen, the new construction market has seen a remarkable resurgence this spring. As mortgage rates spurred a housing downturn last year, builders like D.R. Horton and Lennar had the breathing room to reduce margins (i.e. cutting house prices and/or aggressive rate buydowns) in pursuit of attracting priced out buyers. And it’s working: Builder cancellation rates have normalized, while new home sales are once again on the upswing.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
