Better Just Went Public at a Bad Time for Mortgage Lenders. The Stock Was Down 93%.
Better Home & Finance, a mortgage origination company, went public at a bad time as mortgage rates rise, causing the stock to drop by 93%.
Topics
Relevant topic timeline:
Institutional firms in the housing market have significantly reduced their home purchases due to spiked interest rates and a lack of available homes for sale, but there are signs of another surge on the horizon with the securing of capital by companies like MetLife Single Family Rental Fund and plans for joint ventures in rental home development by J.P. Morgan Asset Management and American Homes 4 Rent.
The surge in mortgage rates has caused housing affordability to reach the lowest level since 2000, leading to a slow fall in the housing market and a potential dip in home prices, although the current market differs from the conditions that preceded the 2008 crash, with low housing inventory and a lack of risky mortgage products, making mortgage rates the key lever to improve affordability.
Mortgage rates topping 7% have led to a significant drop in mortgage applications for home purchases, with last week seeing the smallest volume in 28 years. The increase in rates, driven by concerns of high inflation, has priced out many potential buyers and contributed to low housing supply and high home prices. As a result, sales of previously owned homes have declined, and homeowners are reluctant to sell their properties due to the higher rates. Some buyers are turning to adjustable-rate mortgages to manage the increased costs.
Online mortgage lender Better.com, which recently made its public debut on Nasdaq, has secured $565 million in fresh capital, including a $528 million convertible note from SoftBank affiliates, as it looks to grow its business and improve its technology to provide faster and cheaper home loans.
Shares in online mortgage lender Better plummeted more than 95% as investors turned away following its merger with a blank-check company, coinciding with a surge in mortgage rates.
Mortgage rates in the US climbed to a 22-year high, surpassing 7%, which is posing significant challenges for first-time homebuyers and exacerbating the wealth gap between homeowners and renters.
Shares of Better Home & Finance Holding, the parent company of digital lender Better.com, plummeted 93.4% on its Nasdaq debut after merging with a special purpose acquisition company (SPAC), due to a weak mortgage market and dwindling investor interest in SPACs.
Shares of online mortgage lender Better.com plunged as much as 95% on its Nasdaq debut, following a series of controversies including a mass layoff of 900 employees via a Zoom call by CEO Vishal Garg.
The average mortgage rate in the U.S. has surpassed 7% for the first time in over two decades, leaving homeowners feeling trapped by their low interest rates.
Homebuyers' purchasing power has been negatively impacted by rising mortgage rates, which averaged 7.2% in August, the highest level since 2001, resulting in a decline in existing home sales and a shift towards new-construction homes.
Mortgage lender Better.com experienced a significant drop in share prices after going public, following financial decline, mass layoffs, and controversial behavior by CEO Vishal Garg.
Shares in online mortgage lender Better Home & Finance Holding rebounded slightly after a poor debut, with the company backed by SoftBank seeing a 4.3% increase in its stock price following a merger with a blank-check company, although it still finished the day down 93.4%; CEO Vishal Garg believes the company's technology will drive long-term growth and create shareholder value when interest rates normalize.
Digital mortgage lender Better.com had a disastrous public market debut, with its stock closing at just $1.19, resulting in a market cap of only $19.14 million, compared to its initial plans to go public at a $7.7 billion valuation. Conversely, Affirm, another fintech company, saw its stock prices rise by nearly 30% after reporting better-than-expected earnings.
Prospective home buyers can still secure a lower mortgage rate in today's market by improving their credit score, shopping around for lenders, considering an adjustable-rate mortgage, buying mortgage points, locking in a rate, and making a large down payment.
Stocks are expected to decline as mortgage rates soar, causing many Americans to be unable to move and resulting in a bubble in home prices, according to economist David Rosenberg.
Low inventory, high mortgage rates, and high prices have created a difficult housing market, making it challenging for house hunters to break into the market and leading to a substantial decline in purchases by real estate investors.
The housing market is entering its slow season and home sales may be impacted by high mortgage rates, but home builder stocks could remain strong.
Homebuilders are thriving due to a chronic shortage of existing housing inventory, leading to increased home prices and strong sales, according to KB Home CEO Jeffrey Mezger. The lack of inventory is also reflected in the significant drop in active home listings, with only Austin returning to pre-pandemic levels, while other markets have experienced substantial declines. Despite rising mortgage rates, the scarcity of existing inventory has prevented a steep national home price decline.
US mortgage rates have decreased slightly for the second consecutive week, but they remain above 7%, causing home affordability to reach its lowest level in nearly four decades.
Mortgage payments in the US have reached a record high due to high mortgage rates and increasing home prices, causing pending home sales to decline by 12% year over year and pushing some buyers to the sidelines; however, sellers can still expect fair prices due to low inventory.