Key Takeaways:
Shares of mortgage lenders surged Wednesday after Congress passed the 21st Century ROAD to Housing Act, the most sweeping housing affordability legislation in decades, sending Rocket Companies up 9.4%, PennyMac Financial 3.9% and loanDepot 5.3%.
"The sooner this bill becomes law, the sooner builders and homebuyers will benefit from its downstream effects," said Danielle Hale, chief economist at Realtor.com. "Even if the president were to sign this bill immediately, many of the provisions will take time to impact builder planning."
The bill, which passed the House 358-32 and the Senate 85-5, targets a housing shortage that has left the U.S. short by more than 4 million units, according to Realtor.com. Home prices have climbed 54% since 2020, and the median existing single-family sales price now stands at nearly five times the median household income, per Harvard's Joint Center for Housing Studies. A family needs about $117,000 a year to afford the typical home on the market, Redfin data show, almost $30,000 more than what most U.S. households earn.
The legislation would ban corporate investors from buying more than 350 single-family homes, streamline environmental reviews for new construction and remove costly manufacturing requirements that add $5,000 to $10,000 to the price of manufactured homes. But President Trump abruptly canceled the signing ceremony Wednesday, demanding Congress first pass a voter ID bill, leaving the fate of the housing package uncertain despite its veto-proof majority support.
The rally in mortgage stocks reflects investor expectations that the bill, if enacted, would unlock housing supply and stimulate transaction volumes — the two biggest headwinds for lenders. Rocket Companies, which operates the largest digital-first mortgage platform in the U.S., stands to capture demand efficiently if homebuying activity improves, given its investments in technology and automation. PennyMac Financial and loanDepot, both heavily reliant on purchase mortgage origination, would benefit from a pickup in transaction volumes.
A 30-year drought in federal housing policy
The last time Congress passed major housing legislation was more than three decades ago, according to Sen. Elizabeth Warren, a co-sponsor of the bill. "Every time every member of Congress goes back home they hear how urgent it is to bring down home prices," Warren said. "Finally, we are actually moving."
The bill's provisions extend beyond construction. It would expand government rental assistance, raise limits on public housing renovation financing and require new renter protections. It also creates a grant program for communities to develop preapproved housing designs, reducing the permitting timeline for builders.
The Trump factor
Despite the bipartisan support — enough to override a potential veto — Trump's decision to withhold his signature introduces significant uncertainty. Speaker Mike Johnson said Wednesday he had spoken with the president and was confident Trump would ultimately sign the bill. "The president, when we go through the details of the bill, he's going to understand that it's a good product," Johnson said.
For mortgage lenders, the stakes are high. Mortgage rates remain elevated at about 6.5%, keeping existing-home sales stuck near a 30-year low of about 4 million annualized units, well below the historic norm of 5.2 million. Even if the bill becomes law, its impact on housing supply would take years to materialize, Hale noted.
This article is for informational purposes only and does not constitute investment advice.
