Rocket Companies (RKT), the largest mortgage originator in the United States, has increased its home loan volume significantly year-over-year, due primarily to a home buying spree and rising housing prices. Although the housing-market tailwinds could be beneficial for the stock, its business could be negatively impacted by an increase in mortgage rates. In fact, we think an expected slowdown in its profit generation makes RKT’s near-term prospects uncertain. Read more to find out.Real estate and mortgage business operator Rocket Companies, Inc. (RKT) made its stock market debut in August 2020. It is the largest mortgage lender in the United States. Its shares have plunged 12.9% year-to-date and 20.4% over the past month. While RKT has been able to double its home loan volume year-over-year, the company’s management expects its closed-loan volume to be between $82.5 billion to $87.5 billion in the second quarter of 2021. This would represent a significant sequential decline from $103.5 billion.
The stock is currently trading at $17.61, 59% below its 52-week high of $43.
Although the sizzling housing market has thus far been an advantage for RKT, given that the company’s refinancing business is heavily reliant on loan volume and is sensitive to mortgage rates, we think the stock could be a risky bet.