Profit Pregame

As The Housing Market Phenomenon Continues – Here’s How I Plan to Cash In on The Action

The strange phenomenon

The housing market is booming.

What’s happening?

It’s been a surprising twist of fate, but despite the loss of job and economic struggle, there’s one market that is thriving: the housing market. And because of that, it’s a fantastic time to be a mortgage lender as home buyers continue to flood the market in desperate need of mortgages to secure their dream home.

And Rocket Companies, who happens to be the newly-public mortgage company formerly known as quicken loans, is seeing an unprecedented surge in business. Rocket companies went public on August 6, 2020, and their performance has been anything short of impressive.

Here’s a breakdown of what we’ve seen…

Where’s the money?

In its third-quarter profits that it released earlier this week, the Rocket Company reported a 506% spike in profits. The amount of mortgages Rocket issued more than doubled to a record $89 billion. Its CEO, a 25-year old veteran, noted that in all his years, he had never seen an explosion in business quite like this.

Rocket Company, which is based out of Detroit, has become America’s biggest mortgage lender over the years – taking the title from Wells Fargo a little of three years ago. And Morgan Stanley analysts believe that the company is on the right path -explaining that Rocket is gaining market share in a” record hot mortgage market “- a big feat for any company.

But before you rush off to put your money in this booming sector, there’s something you need to think about…

How do I get some?

In such an unstable environment, I have to admit; I’m surprised to see so many people rushing to buy a home. Unemployment rates are high, businesses are shutting down, and yet, we still see Americans committing to these life long mortgages.

But it makes sense seeing that there is a massive disconnect between the stock market and the economy. There is also a disconnect between consumer spending and business revenue. And that’s because people are buying houses and spending money on the homes they own as if the economy is booming.

So, you have to ask yourself two questions: how long can we keep this up? And how do we take advantage of this disconnect as a trader…

For me, I’m looking at who is providing the inventory to these hungry buyers. And that would be D. R. Horton Inc – a well-known homebuilder. The homebuilder recently reported earnings and saw sales spike 81%. And their outlook for the upcoming quarter looked bright. That’s why I’m going to be looking to buy this homebuilder on any dip – and ride their success straight to the bank.

In the spotlight: Another jobs report breakdown…

Another week has passed, and another jobs report is on the table. And it seems to tell the same story we’ve seen for a while – America’s jobs recovery is slowing down. As far as the hard numbers, here’s what we saw this week…

709,000 Americans filed first-time claims for unemployment benefits last week on a seasonally adjusted basis. And on top of that, another 298,154 workers filed for Pandemic Unemployment Assistance. This is a program created under the CARES Act to help ensure those ineligible for regular aid, such as the self-employed, have the benefits they need.

And when you add these two numbers together, first-time claims still stood at one million – bolstering the claim of America’s slow recovery. When looking at continued jobless claims – which includes people who have filed for benefits for at least two weeks in a row – the number came in at 6.8 million. And while many would celebrate that decline, it could also be a red flag as the number could be dropping for the wrong reason.

When it comes to the way states handle their benefits, it’s a state-by-state basis. And many states only provide jobless benefits for a limited period, which is commonly 26 weeks. Typically, people will move into a new program, such as the Pandemic Emergency Unemployment Compensation programs. This means that lowering numbers could simply be people getting shifted around. And that’s why I’m not celebrating anything just yet.

Now, I’ll be sure to keep an eye on this situation as it continues to evolve, and I’ll be sure to keep you updated.

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