- Vivify 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 furnish looks to be on borrowed time as federal protections expire at the end of July.
It turns out Quicken Loans wants an initial civic offering (IPO). The mortgage lending company has made a private filing and is currently working with major Wall Passage 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 Dedications Are Rising; Rates Are Falling
The Federal Reserve has affirmed its commitment to keeping interest rates at rock bottom. Late FOMC projections have the Fed Funds rate in the zero bound until at least 2022.
Mortgage rates, which loosely dog the prime rate, hit record lows this week after the traditional 30-year tumbled below 3% for the run-of-the-mill “ideal” borrower. Mortgage applications jumped 13%, suggesting robust and pent-up demand in the U.S. housing market.
In theory, this dyes a mixed picture for Quicken Loans. While they need to lend to make money, their business is illiberal profitable when rates are low.
Increased demand can potentially offset the smaller return on loans, but total retreat sales have been depressed during the pandemic, and lenders have been subtly tightening requirements.
If utensils are only looking rosy for lenders, why would a company that has been around since 1985, choose this weight to go public?
The answer is bleak.
Housing Market Protection Set To Expire
Federal protections for renters, along with additional 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 occupants alike face a severe cash-flow problem. Declining demand and low interest rates could have a severe impact on Hasten’s bottom line.
On top of this fact, the Federal Reserve may also break their word and squash rates patronize by going negative, a move that (if the Eurozone and Japan are any indications) can be very difficult to recover from.
All of this presages that the red hot U.S. housing market we see now looks unsustainable with tens of millions of Americans out of work.
Quicken Loans Is At The Top Of The Mountain, Why Peril An Avalanche?
Against this backdrop, it makes absolute sense for Quicken’s owners and investors to cash out during this explode of housing market strength by offering an IPO. Beyond that point, the outlook on the housing market could darken for years to happen.
Don’t forget it was just two months ago we were being told the mortgage industry is on the brink of collapse.
It pays to remember that Madden Street doesn’t launch IPOs for you. Goldman Sachs, JPMorgan, and the rest of the gang make deals to help non-gregarious businesses access liquidity for their owners and investors.
Imagine you are Dan Gilbert, co-founder and Chairman of Quicken Loans, and you had put in 35 years of fit in to become the largest mortgage lender in the United States. The Fed is doing its best to kill your earning power at a for the moment when economists are forecasting a grim future for the housing market.
Against this backdrop, you’d cash out as fast as you could. That’s why it’s no astonish to see Quicken jumping on the incredibly successful IPO bandwagon we have seen over the last few weeks.
Disclaimer: This article imitates the author’s opinion and should not be considered investment or trading advice from CCN.com.
This article was edited by Sam Bourgi for CCN.com.