Let's talk about the pro and cons of investing into Rocket Companies, why I think it has great potential as a long term investment, but I do not think it’s a good point of entry right now due to the macro economics. If this is the type of content you’ve been looking for, please hit that like button and let’s get started
So Rocket Company owns a ton of business, really trying to capture the end to end businesses of anything that touches lending and insurance related to lending. The main part of their business around home loans so we’re going to stick to this bit (imo I think their growth verticals still have a lot of work ahead of it).
According to Forbes, they own about 10% of the entire market share of home loans, the majority of which is made up of refinancing. This makes a lot of sense to me because most people who are looking to buy a house are leveraging lenders based on their realtor’s recommendations, not self service, because let’s face it. It’d take a lot of balls for somebody to try to self service a 30 year debt when you have a professional who is offering you guidance for free.
Their refinance game is strong most likely because their search engine optimization and paid search advertising is great, because then you ARE looking on your own to figure out where and how to refinance.
Reason #1: Macro Economics -> Inflation + low rates
- The most obvious positive about investing in a mortgage company is buying real estate is both the american family’s dream AND what every successful investor eventually dive into. Those fortunate enough will gladly go into debt to own land and property. There are many many positive reasons to buy and I highly recommend it as long as you aren’t going in with a variable mortgage rate. Furthermore, when inflation is happening AND when interest rates are low, investors and regular folks alike will look to buy into real estate.
- Also, with mortgage rates at record lows, there are plenty of indicators highlighting that there is so much demand for buying it is currently a seller’s market. Consequently, we can imagine why Rocket did so well during the COVID crisis, where people less fortunate is looking for stability while people with fortune are buying.
- If you guys are interested in the real estate side of things, I highly recommend you check out some of Grapham Stephen’s videos, since that’s his bread and butter and I’m all about promoting other Stevens (even though he spells his name wrong)
Reason #2: Acceptance of Remote Productivity
- The interesting thing about tech space being allowed to move remote is that I actually think there is going to be housing booms in areas of the United states that are much more pleasant to live rather than where the tech hubs are. I think the indications will come in from the rental side first, because I’ve had several friends and colleagues who said they’re moving because what’s the point of paying 3-4 grand a month for rent here when it’s half that somewhere else with better weather. They definitely have the money to buy, but they want to feel things out first and see how viable it is at their new locations.
- That is a long winded way of saying if the market holds up, there might actually be another housing boom and that will drive companies like Rocket up even more.