The past few years have been brutal for homebuyers.
Prices have skyrocketed in desirable locations as populations shifted during the Covid pandemic. Once-affordable markets like Florida saw prices climb as people decided to move to warm-weather locations.
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The logic appeared to be that if people were going to be spending a lot more time at home due to social distancing, than they might as well live someplace where the weather was good. At the same time, prices in major northern cities may have dipped a little, but over the past couple of years, they recovered and climbed.
On top of expensive inventory, mortgage rates have skyrocketed since being consistently sub-3% in 2020. Current rates sit at 6.77% for a 30-year fixed mortgage as of June 26.
It's a double whammy that means many houses have become unaffordable to the vast majority of Americans. If interest rates dropped, buying power would increase, but if that happened across the board, housing prices might jump as well.
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If, however, some buyers can lock in a mortgage at a lower rate, even if it's just for a limited period, that could provide the edge they need to gain an advantage over other buyers.
A new giant player in the housing space wants to help make that happen.
Image source: Getty Images
Rocket Mortgage makes a key deal
A few years ago, it seemed like large online real estate companies led by Zillow and Redfin would take a major share of the real estate market. Both seemed poised to disrupt the existing system of local Realtors, but that never really happened.
The reality is that for many people, buying a house was about relationships. Many homebuyers had a Realtor they trusted.
Yes, Zillow and Redfin promised lower commissions, but even though they offered agents to work with buyers, it was just not the same. Both Zillow and Redfin sort of stalled out and never really became the giants many thought they could be.
Both are still good for real estate browsing. If you like looking at new homes and imagining buying them, either site worked well, but actual buying remained largely with local Realtors.
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In March, mortgage giant Rocket Mortgage (RKT) , a fintech platform consisting of mortgage, real estate, and personal finance businesses, entered into an agreement to purchase Redfin, a leading digital real estate brokerage. In the all-stock deal, Rocket Mortgage agreed to pay $12.50 per Redfin share or $1.75 billion of equity value.
“Founded in 2004, Redfin is one of America's most recognized real estate brands, operating a top-three home search platform with more than 1 million for-sale and rental listings and a tech-powered brokerage of more than 2,200 agents,” the company shared in a press release.
Rocket Mortgage closed Redfin purchase
Rocket CEO Varun Krishna explained the logic of the purchase.
“Rocket and Redfin have a unified vision of a better way to buy and sell homes. Together, we will improve the experience by connecting traditionally disparate steps of the search and financing process with leading technology that removes friction, reduces costs and increases value to American homebuyers,” he said.
That's pretty much what every company that's trying to disrupt the status quo in real estate has said over the years.
Rocket Mortgage closed the Redfin deal on July 1, which Krishna celebrated.
“I've used Redfin every day for the last 20 years. It helped me find and fall in love with my first home, completely changing how I thought about real estate. The Redfin team is best-in-class in building a product experience focused on simplicity. It was a perfect fit for Rocket's vision of what the homeownership experience should be,” he shared.
The newly combined company is offering cheaper mortgages as an incentive to attract new customers, which it's calling Rocket Preferred Pricing.
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“Clients who finance their home through Rocket Mortgage and buy a home listed by a Redfin agent or purchase with the help of a Redfin agent will have a one percentage point reduction in their interest rate for the first year of their loan or receive a lender credit at closing, up to $6,000,” the company shared.
Rocket Preferred Pricing is available to qualified clients buying a home with conventional, FHA, or VA loans.
