Shares of Rocket Companies (NYSE:RKT) retreated 0.8% to $14.61 during Thursday's trading session, giving back some gains after a sharp rally tied to a bipartisan housing bill lost momentum. The stock had surged 9.35% on Wednesday, with volume hitting 60.7 million shares, more than double the 50-day average of 25.9 million, before the bill's anticipated signing was canceled by President Donald Trump.
The legislation, which passed the House 358-32 and the Senate 85-5, aimed to expedite environmental reviews for housing projects and cap large institutional investments in single-family homes. However, the enthusiasm faded after the White House scrapped the signing ceremony, leaving the bill's future uncertain. For Rocket, the setback comes at a critical time as the company's fortunes remain closely tied to mortgage rate trends and housing inventory levels.
Mortgage Rates Hold Steady, Pressure Loan Demand
According to the Mortgage Bankers Association, mortgage applications edged up 1% for the week ending June 19, with refinance demand rising 3% and purchase applications slipping less than 1%. The average 30-year mortgage rate remained near 6.59%, virtually unchanged from the prior week's 6.60%, according to Freddie Mac data. The 30-year fixed rate has hovered around 6.5% for approximately six weeks, creating a persistent headwind for Rocket's core origination business.
Rocket's first-quarter results reflected this sensitivity: the company reported $49.4 billion in total net rate lock volume and $44.7 billion in closed mortgage loan origination volume, with a gain-on-sale margin of 2.74%. CEO Varun Krishna noted during the earnings call that the company is not waiting for market conditions to ease, signaling proactive efforts to navigate the rate environment.
Housing Market Data Mixed
Redfin, now owned by Rocket, released its Home Price Index for May, showing U.S. home prices rose 0.3% from April and 2.5% year-over-year, marking the fastest annual gain in six months. However, pending sales have leveled off as mortgage rates climbed in May, according to Redfin senior economist Sheharyar Bokhari. He suggested that buyers hoping for price declines may need to seek concessions from sellers instead.
The broader market showed little reaction to Rocket's pullback. The SPDR S&P 500 ETF (SPY) remained flat, while the Invesco QQQ Trust (QQQ) gained 0.7%. Among mortgage peers, UWM Holdings (UWMC) rose 3.7%, loanDepot (LDI) fell 2.5%, and PennyMac Financial Services (PFSI) edged up 0.1%.
Analyst Views Split on Rate Sensitivity
Wall Street remains divided on Rocket's prospects. Over the past three months, analysts have issued four Buy ratings and five Hold ratings, with no Sell recommendations, according to Google Finance data. On Thursday, KBW's Bose George reiterated a Buy rating with a $20 price target, while Morgan Stanley's Jeffrey Adelson maintained a Hold at $18. Adelson's cautious stance stems from Rocket's exposure to mortgage rates; he noted that the company would need rates at or below 6% to drive meaningful earnings growth.
Trading activity remained elevated, with approximately 93 million shares changing hands between Wednesday and Thursday, roughly 3.6 times the 50-day average daily volume, according to MarketWatch. The stock touched an intraday high of $15.54 before retreating, and it remains 39.53% below its 52-week high of $24.36 set on January 16.
