Rocket CFO Predicts First-Time Buyers Will Drive Market In 2023

First-time homebuyers will drive the housing market in 2023, according to a prediction from Brian Brown, chief financial officer and treasurer of Rocket Companies.

Brown made his prognosis during a one-on-one conversation with Fitch Ratings Director Shampa Bhattacharya last week. In that interview, Brown speculated that first-time home buyers will drive purchase volume in 2023 because that segment will actually benefit from the 5% dip in sales prices.

“A little bit of price decline is OK in the mortgage space,” Brown told Bhattacharya, whose agency is predicting a deterioration in the non-bank sector this year.

Regardless of the Fitch outlook, Brown said that he expects the industry to do in the neighborhood of $1.7 to $1.9 trillion in loan originations in 2023, which he noted is about the average if two straight years of $4 trillion in originations in 2020 and 2021 are removed from the equation.

“What’s likely to be different is the mix between refi and purchase,” he said. “We’ll hold strong.”

Brown added that Rocket is in good position to ride out the downturn because they work on several platforms, including direct-to-consumer, partner networks with big banks and third-party originators with independent brokers.

“Purchase requires reach from multiple platforms,” Brown said, adding that the company also expects to benefit from its purchase of the Truebill app last year because many of those first-time homebuyers they hope to grab are reachable there.

Asked if profitability is a goal or an expectation for 2023, Brown dodged a direct answer but said that Rocket Companies is focused on right-sizing with a target of $2 billion in cost reductions to maintain cash flow and liquidity.

Brown said he expects Rocket to make it through 2023 because of its improved liquidity and diverse mortgage and other income channels, but he expects more job losses in the industry through the first two quarters of the year and cautioned that the mortgage servicing market could be problematic because it won’t take much to have more supply than demand.

The final key to getting through a difficult market will be consolidation, Brown said, noting that the industry can’t sustain the current trend of loan originators closing one loan a month on average. “One thing we expect to happen is consolidation,” he said. “ The economics are upside down.”

But Brown added that he doesn’t expect Rocket to be a buyer, even in a buyer’s market. “It would have to be an audience we don’t already have,” he said. “We do a lot of looking but have never bought another mortgage company,” Brown said. 

Bhattacharya asked Brown what the current market looks like compared to 2008. He responded in an upbeat tone that there are challenges and opportunities and noted that there’s “a lot of good things,” compared to the Great Recession.

They include, according to Brown: the 5% predicted decline in housing prices, which are starting at a much higher point in housing value than in 2008; loans today are much more secure than those leading up to the financial crisis; and consumers are still in a position of financial strength which wasn’t the case in 2008.

But that final difference is offset, according to Brown, by affordability issues. “What they can afford is different because of mortgage rates,” Brown said.