Is the Housing Market Finally Healing?

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If you've been waiting out the tough housing market this year, things may be finally looking up. According to one expert, the market may be finally "healing."

According to Realtor.com, the national median price for a U.S. home dropped from US$445,000 in June to US$439,950 in July because of a sluggish summer housing market with buyers and sellers watching for economic breaks before making their move.

"As mortgage rates fell in July to their lowest since March on expectations that the Federal Reserve will cut rates as early as September, we suppose some homebuyers may be holding out for lower rates over the next few months," Realtor.com Senior Economist Ralph McLaughlin said.

In an article for Business Insider, Jennifer Sor noted that home prices are being cut at the fastest pace in two years as buyers wait for mortgage rates to ease more.

Home sales are moving at their slowest rate since 2020 and hesitancy among buyers is contributing to listings being cut 18.9% in July, the analysis said.

On Wednesday, it was announced that consumer prices were 2.9% in the year through July, falling below 3% for the first time in three years and keeping the Federal Reserve on track to cut interest rates in September, the New York Times reported.

"This all adds up to good news for buyers who have been waiting for home prices to come back down to earth," Julie Taylor wrote for Realtor.com.

In an article for Business Insider, Jennifer Sor noted that home prices are being cut at the fastest pace in two years as buyers wait for mortgage rates to ease more.

"Price cuts have largely been driven by lower demand, alleviating some of the imbalances that pushed prices to record highs over the past year," Sor wrote.

Mortgage Rates Also Seeing Relief

Even before Wednesday's inflation news, mortgage rates were also seeing relief. "U.S. 30-year mortgage rate plunged last week by the most in two years, reaching their lowest level since May 2023 and sparking a surge in refinancing applications," wrote Vince Golle for Bloomberg on Aug. 7.

The contract rate on a 30-year fixed mortgage declined 27 basis points to 6.55% in the week ending Aug. 2, the Mortgage Bankers Association said, according to Golle. "The rate on a five-year adjustable mortgage plummeted 31 basis points to 5.91%, the lowest this year," he wrote.

Thomas Ryan, North America economist at Capital Economics, said in a research note that the decline in rates should set the stage for "a modest recovery," according to Bloomberg.

"We think this marks a turning point for the housing market, which has been frozen for a while now," Thomas Ryan, North America economist at Capital Economics wrote.

"We think this marks a turning point for the housing market, which has been frozen for a while now," Ryan wrote.

According to a report in The Wall Street Journal on August 8, mortgage rates aren't directly tied to what the Fed does but tend to loosely follow the yield on the benchmark 10-year Treasury note, "which rises and falls based on expectations for the economy," authors Gina Heeb and Nicole Friedman wrote.

"Rates add up quickly when it comes to mortgages: A difference of a few percentage points can translate to hundreds of thousands of dollars in interest over the life of a 30-year loan," they wrote. "Many would-be buyers have found themselves priced out of the market in recent years, while would-be sellers have been hard-pressed to give up mortgages they locked in before rates went up. That has worsened supply challenges that have kept prices near record highs."

'Market Is Healing'

But some experts said it all still comes down to supply and housing prices.

"Rates are going to go up, they're going to go down," Sam Khater, chief economist at Freddie Mac, told The Journal. "The bigger structural issue is the lack of inventory. That's not going away."

But that is improving. McLaughlin from Realtors.com said the total number of homes for sale in July was 36.6% higher than the year before, marking nine consecutive months of growth.

It "now sits at a post-pandemic high," McLaughlin said. "It's a welcome sign that the housing market is normalizing, and it tells us the market is healing."

And with rates improving, more homeowners are also refinancing their home loans to get lower monthly payments. The Mortgage Bankers Association's refinance index tracks home loan application volume. That rate surged 16% during the week of August 8 from the previous week to its highest level in two years, Market Hundred reported. Refinance applications were up nearly 60% versus the same week last year.

For those looking to take advantage of these new situations soon, there are several mortgage companies ready to assist, including these publicly traded ones and one private company.

Rocket Companies Inc.

Rocket Companies Inc. (RKT:NYSE), a pioneer of the online mortgage industry, has been the top mortgage lender by number of originations for years, according to the Motley Fool.

In 2022, the Detroit-based lender originated more than 464,000 mortgages worth $127.6 billion, giving it a 5.5% share of the market by origination.

In addition, the company has been ranked number one in customer satisfaction in America by J.D. Power for at least nine times. The rankings are based on client feedback by the independent research firm. It also ranked at the top of the listings for digital channels, being easy to do business with, keeping clients informed and educated, and resolving problems or questions.

Nerd Wallet currently has a 4 out of 5 score for Rocket Mortgage, saying it "stands out as the nation's No. 1 FHA lender, helping borrowers with limited down payment funds, but all home buyers and refinancers can take advantage of the lender's convenient website and app to both apply for and manage their loans."

According to TipRanks, out of 10 analysts rating the stock in the last three months, six rated it Hold, and four rated it Sell, with an average price target of US$12.53 per share.

According to the company, it had an adjusted revenue of US$1.2 billion in the second quarter and delivered an adjusted EBITDA of US$225 million, increasing year-over-year for the fifth straight quarter.

Reuters reported that management and insiders own 7% of the company, and institutions own 73%. The rest is retail.

Top shareholders include The Vanguard Group Inc. with 8.65%, Fidelity Management & Research Co. with 7.81%, Boston Partners with 6.68%, JP Morgan Asset Management with 5.71%, and Fidelity Investments Canada ULC with 4.97%.

It has 1.988 billion shares outstanding with 128.6 million of them free float traded shares. Its market cap is US$37.7 billion, and it trades in a 52-week range of US$18.71 and US$7.17.

Loan Depot Inc.

Loan Depot Inc. (LDI:NYSE), with more than 156,000 new loans in 2023 for US$52.53 million, ranks third on the Motley Fool's list for home loan originations.

Second quarter financial results released on August 6 show an adjusted revenue of US$278 million, the highest level since the beginning of the market downturn. However, it had a net loss of US$66 million, including non-operational charges of US$27 million related to a cyberattack that affected 16.9 million customers.

In June, the company's President and Chief Executive Officer Frank Martell earned Inman's 2024 "Best of Finance" award for the second year in a row. Inman is a news source that covers the industry.

In a research note on June 16, Price Target Research gave the stock its highest rating, an "A."

"LDI's future returns on capital are forecasted to be in line with the cost of capital," the firm said. "Accordingly, (although) the company is expected to continue to be value creation neutral, Loan Depot has a current value trend rating of A (highest rating)."

The company also has been noted for its attention to Hispanic and non-white mortgage applicants. In 2022, the company placed 37 agents on the National Association of Hispanic Real Estate Professionals list, the highest number of any company.

"We continue to advance the pillars of our Vision 2025 plan by serving today's increasingly diverse community of first-time homebuyers and creating new ways to develop a lifecycle relationship with our customers," said Martell.

According to Reuters, 20% of Loan Depot shares are held by management and insiders. CIO and Head Economist Jeff DerGuarahian has 7.1%, and Jeff Walsh has 4.73%.

About 32% is with institutional investors. Cannell Capital LLC has 6.23%, The Vangaurd Group Inc. has 5.32%, Parthenon Capital Partners has 4.7%, Brandywine Global Investment Management has 3.38%, and Knightsbridge Wealth Management has 3.22%.

The rest is in retail.

Loan Depot has a market cap of US$821 million and more than 325 million shares outstanding. It trades in a 52-week range of US$1.14 and US$3.71.

Bank of America Corp.

In addition to being the nation's second-largest banking institution, Bank of America Corp. (BAC:NYSE) is also No. 6 on Motley Fool's list with more than 121,000 loan originations for US$53.5 billion.

Its Community Affordable Loan Solution for properties in minority communities in several cities uses credit guidelines based on factors such as timely rent, utility bill, phone, and auto insurance payments and requires no mortgage insurance or minimum credit score. Individual eligibility is based on income and home location. Anyone from any race or ethnicity is welcome to apply, the bank said.

The bank said it has helped 36,000 people and families become homeowners through the program and provided more than $9.5 billion in low down payment loans and over US$350 million in non-repayable down payment and/or closing cost grants.

Yahoo! Finance rated the company 3.9 out of 5 stars for service, saying the financial giant offers a "big-bank menu of mortgages." Customers can get grants for down payment assistance and even allows some medical professionals to make lower down payments and exclude student loans from debt limits.

According to Reuters, about 61% of the company is held by institutions and about 12% by strategic entities. The rest is retail.

Top shareholders include Warren Buffett's Berkshire Hathaway Inc. with 12.15%, The Vanguard Group with 8.23%, BlackRock Institutional Trust Co. with 4%, State Street Global Advisors (US) with 3.77%, and Fidelity Management & Research Co. with 2.2%.

The company's market cap is US$300.84 billion, with about 7.8 billion shares outstanding. It trades in a 52-week range of US$44.44 and US$24.96.

Beeline Loans Inc.

Those looking for an easier and more streamlined process can go to digital mortgage lender Beeline Loans Inc., which has an online portal and A.I.-powered chatbot that connects with consumers and quickly evaluates their eligibility for loans.

"Get a home loan from your sofa" and apply in less than 10 minutes, the company's website says.

Beeline said this digital approach to conventional mortgage lending will increase engagement with young people who have been hesitant to buy homes in recent years.

"It can be a power imbalance, where the 'little guy' can't access the same loans the tycoons use and can feel small up against the 500-pound mortgage lender who holds all the power — and the money," the company noted on its site. "So, we've opened it up to everyone, transforming a meandering home loan journey into a Beeline — using a combination of tech, old-fashioned warmth, and responsiveness."

Beeline's chatbot, named Bob, is available 24 hours a day and is capable of answering complex questions. Based on these conversations, Bob will provide the customer with a personalized quote. A representative of the company stated that the chatbot "poses highly personalized product-specific questions to generate a quote in real-time."

The company has expanded its offerings to offer better service for Hispanic customers, as well. A new version will instantly detect the language of the consumer and give faster more accurate answers. Colmena users will automatically be routed to a bilingual loan officer to guide them through the process.

"Colmena will feature tailored mortgage products that are culturally aligned to address the specific needs and preferences of Latino homebuyers, plus educational resources to promote homeownership and empower individuals and families to achieve their dreams of owning a home," said Miguel Vega, who is spearheading the initiative for the company.

Beeline offers a variety of options, including refinancing, to consumers through the digital platform. It has built its premise on making homeownership more accessible to a wider, more diverse market, making it an attractive prospect if mortgage rates continue to fall.

The company launched a proprietary front-end mortgage platform during Q3 of 2020 and closed 1,500 mortgages by the end of 2021, and 2024 is expected to be Beeline's strongest year.   

Writing for Smart Asset, Chris Thompson reviewed the company and praised its "simple, easy-to-use online application process."

"As an online mortgage lender, everything Beeline Loans offers is accessible through your computer or smartphone," he wrote.

Robinhood revolutionized the stock-buying industry by fractionalizing stocks. This allowed people who previously were excluded from the stock market to enter the industry and paved the way for those people who may have been excluded to get involved. Beeline is now doing for mortgages what Robinhood did for the stock market, and it's powered by AI.

Beeline Loans is a private company, and the company reports that its largest shareholder is founder Nick Liuzza. According to Beeline, it has invested US$40 million in the company. It reports that the Cavalry Investment Fund, Atalaya, and Ellington have made significant investments in the company.