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Coming off an earnings report two days ago that showed his company with $2.3 billion in cash, Rocket Companies CEO Jay Farner predicted in an interview that the country is heading for a recession.
“Although we’re seeing inflation today, we also know things are accelerating rapidly and, as people take on higher mortgage interest rates, that means, in the future, we’ll be refinancing our clients the millions and millions that we’re putting on our platform to lower interest rates because we feel strongly there will be a recession coming here in the coming quarters,” he said.
Farner, appearing on Yahoo finance, said that he expects the U.S. mortgage market, which notched about $4 trillion in loans last year, to decrease to around $2 trillion this year.
“We’re seeing people buy homes,” Farner said. “Prices will probably slow a little bit because of the rising increase (in interest rates) and also the lack of inventory but at 5.5% (the average 30-year fixed mortgage rate), people can still afford homes.
“What we’re experiencing right now is lack of demand in certain aspects of the market and that’s why we’re going (to see a mortgage market that’s) like a $2 trillion market this year,” he added.
Farner appeared to be basing his prediction of a coming recession on Rocket’s TrueBill system, a fintech platform that gives Rocket insight into consumer spending.
“We acquired Truebill last year, which gives us great insight into consumer behavior, so we could watch and see what was taking place with consumers (and) how they’re adjusting to these price increases.
“We’re watching clients cancel subscriptions. We’re watching people already decrease their spending on food, on groceries, on gas. We’re seeing the American public make adjustments already based on the price increases they’re experiencing so that tells us the rise in interest rates is having an impact already,” he added.
The Federal Open Market Committee (FOMC) recently raised the Federal Funds rate, the interest rate which banks use to lend to one another for overnight loans, by 50 basis points last week, the second time they raised the rate this year. It’s expected they’ll raise the interest rate again at their June and July meetings by at least 50 basis points each time. There’s concern the FOMC’s actions could lead to a slowing economy.
Rocket Companies, based in Detroit, is the country’s largest mortgage funder. They released their first quarter earnings on Tuesday, which showed the company with $2.3 billion in cash and a quarterly profit of more than $1 billion, down about 63% from last year’s first quarter.