Homebuying is broken. Rocket thinks it can fix it

Rocket Cos., the Detroit-based mortgage lender, is creating a homebuying super app that handles everything from the first house search to the final mortgage payment. It’s a vision that’s been floated for years in the housing and fintech sectors. Now, Rocket is putting serious capital behind turning that vision into reality.

The company recently announced plans to acquire Redfin, a real estate platform, for $1.75 billion. Just weeks later, it followed up with a $9.4 billion agreement to buy mortgage servicer Mr. Cooper Group. Together, these moves would put home search, financing, and servicing under one roof.

Rocket says the goal is to simplify a confusing and costly process. And, if we are being honest, buying a home in the U.S. today is frustrating. In an investor call earlier this year, Rocket CEO Varun Krishna described the current homebuying process as “fragmented, frustrating and costly.” He is right. The system is broken. Closing costs, commissions, and other transaction-related fees often exceed 10% of a home’s value. Each third-party handoff — title insurer, closing agent, servicer — introduces more fees and more room for error. If Rocket can reduce some of those inefficiencies and pass on the savings, that’s good for consumers.

Still, not everyone is on board. Sen. Elizabeth Warren and several other lawmakers are urging antitrust regulators to scrutinize the deals, warning they could reduce competition and raise costs for consumers. Their concern isn’t unfounded. Consolidation in any industry, especially one as essential as housing, deserves real oversight.

The concern is whether Rocket’s scale will allow it to tilt the playing field too far in its favor. There’s a real risk that dominance in both origination and servicing could limit options for borrowers or squeeze smaller players out of the market. Those risks are worth considering, but they should be weighed with the high potential upside for consumers.

But while skepticism is warranted, so is nuance. Rocket isn’t the only firm trying to centralize the homebuying experience. Zillow launched a similar “one-stop shop” model back in 2022, and other digital-first lenders are heading the same direction. Zillow has even said it sees Rocket’s acquisition of Redfin as “another signal of a shared push toward an improved consumer experience” and good for the industry as a whole. This isn’t just about Rocket, but about the housing market evolving through technology.

There is a risk in maintaining the status quo and that comes at the expense for consumers and frustration of the home buying process.  Importantly, Rocket officials estimate that the Redfin deal alone will cut transaction costs in half. Dismissing the model outright as anti-competitive, without a robust assessment of the long-run consumer impact, is short-sighted.

It’s also worth noting that Rocket’s growth reflects a deeper transformation in U.S. housing finance. After the 2008 financial crisis, many traditional banks pulled back from the mortgage market. Non-bank lenders, like Rocket, filled the gap and now originate the majority of new mortgages and service over half of all U.S. balances. In that context, Rocket’s move is less a takeover of the housing ecosystem and more an alignment of the markets it already is in, reducing transaction costs for customers.

Rocket’s vision for an end-to-end homebuying ecosystem is, in a way, a return to simpler times. The company will provide an opportunity for homeowners to establish and maintain a meaningful relationship with their mortgage lender throughout the lifetime of their loan, just as consumers used to do with their community bankers.

The question isn’t whether consolidation is happening, but whether it can finally streamline a broken system and deliver real benefits to consumers. As John Campbell, an analyst at investment bank Stephens told The Wall Street Journal at the time of the Rocket-Redfin deal, “I think consumers win.”

With interest rates as high as they are, and home prices still shooting straight up, Americans need every bit of help they can get securing their piece of the American Dream.

Danielle Zanzalari is an assistant professor of economics at Seton Hall University, a Garden State Initiative contributor, and a formerfinancial economist at the Federal Reserve Bank of Boston.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: zeb@hwmedia.com.