How low is home inventory? Rocket Mortgage now chasing Realtors

The Detroit-based lender said it's adding 500 mortgage loan originators to target real estate agents around the nation.

By JEFF LAZERSON | jlazerson@mortgagegrader.com | MortgageGrader.com | August 14, 2023

Article originally posted in Orange County Register on August 11, 2023.

I spent a few days at the Inman Connect real estate conference held recently in Las Vegas.

My top takeaway from the event? The industry is in dire straits as homebuying sags.

Event attendance seemed sparse, mirroring real estate transaction volume across the country. In fact, the tone of the conference took a decidedly “try this” approach to boost deals.

Speaker Kofi Nartey, chief executive of the real estate firm Globl Red, tried pumping up the audience Tuesday morning after seeing low energy at the previous day’s events. “The market we are in will change,” he vowed.

Another big takeaway for me was news from Rocket Mortgage. The Detroit-based lender said it’s adding 500 mortgage loan originators to target real estate agents around the nation. Previously, its only direct channel to clients was through its call centers.

“Rocket has already hired 150 (locally based mortgage loan originators) field reps,” said Laine Kostegian, strategic sales director at Rocket. “We’ll have 500 by the end of the year.”

So, what does this mean for you? Consumers now have four ways to shop for a Rocket mortgage: Directly online or by phone, through a local real estate agent, by applying with one of the 5,000 (homeowners) insurance agents approved with Rocket (according to Kostegian), or through a mortgage broker.

Rocket in 2022 was the nation’s top mortgage-originating lender with $133.1 billion in mortgage sales, according to Guy Cecala, executive chair at Inside Mortgage Finance.

Fast forward to mid-2023 and Rocket has dropped to third place with loan sales of $22.3 billion, according to IMF figures. United Wholesale Mortgage is number one and Penny Mac is number two.

So, is this a desperate strategy by Rocket? It seems like an odd time to be adding boots on the ground. Real estate deals likely will slide further as affordability worsens under high mortgage rates.

I bet the Freddie Mac 30-year fixed rates will tip 7% next week (on Aug. 10 it hit 6.96%). That number is a psychological barrier for many buyers who are still actively looking but are mostly on the sidelines until rates soften.

Fannie Mae’s Aug. 7, National Housing Survey indicates only 18% of consumers think it’s a good time to buy a house.

Rocket’s new strategy is telling. Call centers are best for refinance borrowers. And refi’s are largely dead.

Approximately one-third of Rocket’s mortgage sales come from mortgage brokers, according to Cecala. Rocket is likely to take a major sales hit in its broker channel by using this head-on competition. It will be interesting to see if this new tactic brings Rocket increased profitability and pushes it back to top-dog status.

A broader question to ponder is the long-term health of a volume-dependent industry. Unless a blind spot event happens (Covid, a war or a deep recession, for example), how many mortgage lenders will survive this marathon mortgage famine? How much competition and how many choices will be left standing for consumers when they come calling again?

Tamir Poleg, CEO at Real Brokerage was interviewed by Brad Inman on one of the big event stages. Poleg runs the publicly traded high-tech real estate brokerage with more than 11,000 agents and $14.4 billion in 2022 sales. Real Brokerage — along with the likes of EXP — seem to be the up-and-comers.

This model is gaining popularity with real estate agents and brokers compared with some brick-and-mortar legacy brands. It seems Real Brokerage agents and brokers keep more of the commission compared with other big-name firms by using technology and scale while skipping all the brick-and-mortar overhead.

Real estate agents from across the country are struggling with a low inventory of homes for sale. It’s not just California. I chatted with agents from Texas, Oklahoma, South Carolina and Florida, to name a few.

“You can buy rentals in Oklahoma City for $250,000,” said Jenna Lewis, a Lincoln Oklahoma-based Realtor at Lincoln Realty. She told me monthly rent is about 1% of the purchase price, or $2,500.

Conversely, the median price of a single-family home in Hawaii is $1 million, according to Erika Chisarik, a Realtor associate at Coldwell Banker Realty in Honolulu. “The property tax rate is 3.5% (different tax rates depending on occupancy), she said.

“Inventory is critically low. There are still things to buy, but there are (some buyers) with high and unrealistic expectations.”

Please note, I interviewed Chisarik before devasting wildfires wiped out Lahaina on the island of Maui.

The quote of the conference comes from panelist Jonathan Spears, founder of Spears Group, Compass Real Estate, Santa Rosa Beach, Florida. “Don’t breathe commission breath all over them (home sellers) just because you haven’t had a deal in six months.”

Freddie Mac rate news: The 30-year fixed rate averaged 6.96%, 6 basis points higher than last week. The 15-year fixed rate averaged 6.34%, 9 basis points higher than last week.

The Mortgage Bankers Association reported a 3.1% mortgage application decrease compared to last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $726,200 loan, last year’s payment was $815 less than this week’s payment of $4,812.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 6%, a 15-year conventional at 6.125%, a 30-year conventional at 6.5%, a 15-year conventional high balance at 6.625% ($726,201 to $1,089,300), a 30-year high balance conventional at 7% and a jumbo 30-year fixed at 6.875%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $726,200 in LA and Orange counties.

Eye catcher loan program of the week: A 30-year FHA fixed rate at 5.5% with 2 points cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

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* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.