- Quicken Loans is planning an IPO.
- The mortgage lender is cashing out ahead of what could be years of low interest rates.
- A hot U.S. housing market looks to be on borrowed time as federal protections expire at the end of July.
It turns out Quicken Loans wants an initial public offering (IPO). The mortgage lending company has made a private filing and is currently working with major Wall Street banks to make it happen. This tells us a lot about the health of the U.S. housing market, and it’s probably not good.
Mortgage Applications Are Rising; Rates Are Falling
The Federal Reserve has affirmed its commitment to keeping interest rates at rock bottom. Recent FOMC projections have the Fed Funds rate in the zero bound until at least 2022.
Mortgage rates, which loosely track the prime rate, hit record lows this week after the traditional 30-year tumbled below 3% for the average “ideal” borrower. Mortgage applications jumped 13%, suggesting robust and pent-up demand in the U.S. housing market.
In theory, this paints a mixed picture for Quicken Loans. While they need to lend to make money, their business is less profitable when rates are low.
Increased demand can potentially offset the smaller return on loans, but total home sales have been depressed during the pandemic, and lenders have been subtly tightening requirements.
If things are only looking rosy for lenders, why would a company that has been around since 1985, choose this moment to go public?
The answer is bleak.
Housing Market Protection Set To Expire
Federal protections for renters, along with extra unemployment benefits, are set to expire at the end of July.
Many are speculating that the fallout for the housing market could be severe, as over-leveraged mortgage holders and tenants alike face a severe cash-flow problem. Declining demand and low interest rates could have a severe impact…