Housing Supply Tightens as Listings Drop, Testing Rocket's Cyclical Resilience

What happened

A Redfin report, powered by Rocket, shows new U.S. home listings fell 1.7% year over year in late 2025, the sharpest decline in over two years, with pending sales down 4.1%. This reflects weak homebuying demand due to seasonal slowdowns and broader affordability issues, tightening housing supply. Rocket Companies, currently integrating acquisitions like Redfin and Mr. Cooper, remains highly sensitive to such housing market fluctuations, which directly impact its mortgage origination volumes and revenue. The news exacerbates existing risks highlighted in the DeepValue report, including high leverage, volatile cash flow, and dependency on macro recovery for its ecosystem strategy. Thus, it underscores the challenges Rocket faces in executing its transition amidst ongoing cyclical headwinds.

Implication

Lower listings and pending sales could directly reduce Rocket's mortgage origination volumes, a key revenue driver, at a time when the company is absorbing the Redfin and Mr. Cooper acquisitions. This integration phase adds operational complexity and risk, compounding financial vulnerabilities from high debt and volatile free cash flow. Weaker housing activity may delay the realization of targeted synergies, such as cost savings and cross-sell opportunities, impacting adjusted earnings and balance sheet health. Investors should view this as a reinforcement of Rocket's cyclical exposure, necessitating close monitoring of quarterly metrics like originations and FCF against integration milestones. Consequently, it supports the 'WAIT' rating, emphasizing patience until clearer signs of sustainable profitability and deleveraging emerge.

Thesis delta

The sharp drop in home listings aligns with the DeepValue report's caution on Rocket's housing cycle sensitivity, reinforcing rather than shifting the 'WAIT' thesis. It highlights the need for vigilant tracking of macro indicators alongside integration progress, but does not alter the core requirement for evidence of durable earnings and reduced leverage before considering a more constructive stance.