According to The Wall Street Journal, most US mortgage companies that planned to capitalize on the prosperous real estate market faced a serious challenge against the backdrop of market turbulence.
Currently, demand in the US housing and financial markets is quite sustained. During the downturn caused by the coronavirus pandemic, mortgage rates hit their lowest levels on record. This situation spurred a refinancing boom and delivered enormous profits to mortgage lenders.
In late summer, Rocket Cos entered the mortgage market. In August 2020, the company raised about $1.8 billion in its initial public offering (IPO). Rocket's share price soared to over $31 from $18 per share.
The favorable situation in the US mortgage market has enabled a number of mortgage companies to go public through a series of planned listings. According to Mortgage Finance, a research group, six of the 30 largest mortgage lenders have already entered the public market or they are about to do it in the near future.
Some firms such as Caliber Home Loans Inc. and AmeriHome Inc. have postponed their IPOs scheduled for October 29. This decision was triggered by the US stock market crash, one of the steepest falls since the beginning of the COVID-19 pandemic. Another company, Guild Holdings Co., raised about $98 million in its IPO. On October 30, the mortgage lender’s shares were valued at $14.75.
During the period of heightened market volatility, low interest rates helped mortgage companies stay afloat. In July 2020, the 30-year mortgage rate fell to an average of 3% for the first time in nearly 50 years. Earlier, the US Federal Reserve announced its intention to keep interest rates near zero until the end of 2023.
Analysts note that low interest rates have boosted demand for refinancing. The Mortgage Bankers Association estimates that by the end of this year, the total volume of home loans is likely to reach $3.2 trillion, which is 41% more than in 2019.
