Exclusive: Rocket CEO says housing is not a buyer’s or seller’s market. Now it’s even

Matt Egan, CNN Business

Covid-19 has unleashed an epic housing boom that has left first-time homebuyers frustrated by relentless bidding wars and cash offers.

Jay Farner, who heads America’s largest mortgage company, Rocket Mortgage, says the days of vendors holding all the power are over.

“Those moments when… there were 20 proposals are now gone. Buyers may need a little more time,” Farner, CEO of Rocket Companies, said in an exclusive interview with CNN. “The buyer has a little more power or control on their side.”

Home sales fell for the 10th consecutive month in November, the longest decline since at least 1999, due to a sharp jump in mortgage rates.

But Rocket’s CEO isn’t ready to declare this a buyer’s market, at least not yet, because inventories remain historically low.

“I would say it’s a level market,” Farner said. “A few years ago it was clearly a seller’s market. We made verified claims, people got full insurance within 24 hours to ensure that they can present almost like a cash buyer to make an offer on this home. Now they have a little more time. They have more houses to look at… We don’t see 15 listings for one house.”

Where will house prices go?

In recent months, house prices have cooled off from their record highs in 2020 and 2021.

But Farner doesn’t expect house prices to fall. He pointed to the fact that relatively high mortgage rates have made homeowners consider selling.

“As demand declines, we also see supply decline,” Farner said. If this continues, he said, “then we’re probably going to see a pretty soft landing in house prices here, meaning house prices will stay where they are today.”

The housing boom that began in 2020 was fueled in part by extremely low mortgage rates as the Federal Reserve cut interest rates to near zero to revive the economy.

Now the opposite has happened. High inflation prompted the Fed to quickly raise borrowing costs, hitting the housing market 180 the most.

30-year fixed-rate mortgages averaged 6.33% for the week ending Jan. 12, according to Freddie Mac. This is down from 7.08% last fall, but well above the 3.45% from a year ago.

Asked if the worst is over for mortgage rates, Farner expressed cautious optimism.

“I would say we are on the high side of mortgage interest rates over the next six to twelve months,” he said, adding that there are many uncertainties and variables here.

Nervous Americans Cancel Subscriptions to Save Money

While some economists and business leaders are growing hopeful of a soft landing for the US economy as inflation eases, Rocket’s CEO is worried about the downturn.

Rocket’s CEO is less optimistic about the direction of the overall economy.

“A recession is just around the corner here,” Farner said.

He pointed to businesses cutting costs, slowing job growth and showing signs of trouble for consumers.

Rocket Money, a budgeting app run by the Rocket Companies, has identified trends that point to consumer stress.

According to data provided by CNN, the number of Rocket Money users canceling subscriptions increased by 50% year-over-year in the third quarter of 2022. Monthly self-care and wellness expenses are also “steadily declining” among Rocket Money users, the Rocket Companies report.

“People are changing their shopping habits, credit card debt is rising, savings and bank accounts are shrinking,” Farner said. “All of this tells me 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 economic downturn.

“If the Fed continues…hawkish, I think we could have a steeper recession. And it won’t do anyone any good,” Farner said.

The chaotic election of Speaker of the House Kevin McCarthy earlier this month has shed a bright light on the risk of a crisis later this year, when Congress must raise the debt ceiling to avoid a catastrophic default.

Asked if a major debt ceiling crisis worries him, Farner pointed to history as a guide.

“All I can do is look back and know that while there may be some tension, there may be some friction,” he said, “it seems that somehow they find a way to make it happen and we keep working.” . move forward as a country.”

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