The U.S. mortgage market tale of two cities is becoming clearer as borrowing costs ease modestly and activity begins to return for some buyers. While affordability remains strained for many Americans, a narrow segment of homeowners and higher income borrowers are once again stepping into the housing market, a shift that is powering renewed growth at Rocket Companies.
Speaking this week, Rocket CEO Varun Krishna said the company is seeing strong momentum as mortgage rates dip just below 6 percent. That improvement, while limited, has been enough to push certain buyers off the sidelines. Rocket now expects its highest mortgage loan production and strongest gain on sale in four years, a sharp contrast with much of the broader industry.
A rebound that is not evenly shared
The U.S. mortgage market tale of two cities reflects the divide between homeowners who already have equity and renters who are still struggling to qualify. For borrowers with strong credit and existing assets, slightly lower rates can unlock the ability to move, trade up, or buy a second home. Many of these buyers are accepting higher monthly payments than in the ultra low rate era, but they now see mobility as possible again.
Krishna described the recent quarter as a turning point. Mortgage rates reached their lowest levels in roughly three years, and Rocket was positioned to capture demand quickly. Other lenders have not fared as well. PennyMac, a major originator and servicer, continues to navigate thinner margins and a slower recovery as industry volumes remain below pandemic highs.
The uneven rebound underscores how fragile affordability remains. Home prices are still more than 40 percent above pre 2020 levels. Even with rates off their peaks, the monthly payment on a median priced home of $427,000, according to Redfin, often exceeds what a typical household earning about $83,000 annually can comfortably manage.
Younger buyers still face structural barriers
For younger Americans, the math has not improved enough to materially change behavior. Higher down payment requirements, student loan obligations, and competition from older cash rich buyers continue to limit access to homeownership. A rise in mortgage applications, while encouraging for lenders, does not yet signal a broad based improvement in housing affordability.
Economists say incremental progress may still be ahead. Lawrence Yun, chief economist at the National Association of Realtors, recently said conditions should be slightly better this year as inventory grows and the lock in effect fades. Life events, including job changes and retirement, are pushing more owners to list homes and move on.
Yun expects lower mortgage rates to qualify more buyers over time. He projects U.S. home sales could rise by about 14 percent nationwide in 2026, helped by increased listings and a gradual normalization of market turnover.
Why Rocket is outperforming peers
Rocket’s recent performance highlights how business models matter in a constrained market. Through its flagship Rocket Mortgage, the company emphasizes direct to consumer digital lending, with more than half of its volume handled online without brokers. Heavy investment in technology, AI driven customer engagement, and diversification into adjacent financial products have created a large base of repeat customers.
By connecting mortgage servicing and origination at scale, Rocket can retain relationships as clients move from one transaction to the next. Krishna said this integration allows the company to recapture business when customers refinance or purchase a new home, even as market conditions shift.
PennyMac, by contrast, spreads activity across correspondent, broker, and consumer direct channels, with greater exposure to government backed loans and mortgage servicing rights. That structure offers scale but leaves the company more vulnerable to volatility when refinancing slows and margins compress.
What the divide means for housing
The U.S. mortgage market tale of two cities is likely to persist. Existing homeowners with equity and stable incomes are driving much of today’s activity, while first time buyers remain under pressure. As rates gradually ease and inventory improves, conditions may become more balanced, but meaningful affordability gains will take time.
For now, Rocket’s success illustrates how a targeted borrower base and technology driven model can thrive even when the broader housing market remains uneven.
