Housing starts rise on pickup in multi-family projects

Plus: Home buyers and owners are both trapped by high rates, Fannie Mae CEO says

October 20, 2023

Good morning. This is Mortgage Nuggets, the newsletter that brings you all the “oooh”s and “aaah”s of the mortgage industry.

Disclaimer: Average mortgage rates as of Oct 19, 2023. © MND's Daily Rate Index.

1. Homebuyers need to earn $115,000 a year to afford a typical house

Annual income needed to afford a median-priced U.S. home

The housing market is so unaffordable that buyers need to make nearly $115K to afford the average home, Redfin says—that’s $40k more than average earnings

That’s a 15% year-over-year increase and the highest annual income on record to buy a home.

2. Existing home sales drop to 13-year low in September

Sales of previously owned homes fell in September to the lowest level since 2010 as affordability worsened even further.

Contract closings decreased 2% from a month earlier to a 3.96 million annualized pace, National Association of Realtors data showed Thursday.

Sales were down nearly 19% from a year earlier on an unadjusted basis. The median selling price rose 2.8% from a year earlier to $394,300, the highest September reading on record.

"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," said Lawrence Yun, NAR's chief economist. "The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains."

3. More nuggets

💍 Nearly 1 in 5 couples include ‘home fund’ in wedding registry: Study. (The Hill)

🏛️ Senate votes 53-44 to block the CFPB small business data collection rule. (Banking Dive)

📈 The 30-year fixed mortgage rate hit 8% for the first time since 2000. (CNBC)

4. Housing starts rise on pickup in multi-family projects

New home construction rose in September, led by a pickup in multi-family projects.

Residential starts increased 7% last month after falling by the most in over a year in August, according to government data released Wednesday. Multi-family dwellings rose more than 17% after also slumping the prior month.

Applications to build — a proxy for future construction — fell to 1.47 million. Permits to build one-family homes ticked up to the highest level since May 2022, while multi-family authorizations declined to the lowest in nearly three years.

5. Home buyers and owners are both trapped by high rates, Fannie Mae CEO says

The housing market is pushing buyers and sellers to opposite ends, as one group struggles with affordability while the other is locked into low rates.

"It's a tale of two markets," Priscilla Almodovar, chief executive of Fannie Mae, told MarketWatch in an interview on the sidelines of the Mortgage Bankers' Association's annual conference in Philadelphia.

"Homeowners are in good shape because they probably have a lot of equity in their homes. They probably have a mortgage that's 2%, 3%, 4%," she explained, but are constrained by a "lock-in effect of not giving up that mortgage."

On the flip side, buyers are also contending with mortgage rates at the highest level in 23 years, and are dealing with low inventory due to homeowners not selling. Inventory of homes for sale shrank by 4% in September as compared to the same time last year.

☀️ See you on Monday!

Coming up: Jerome Powell is speaking today at the Economic Club of New York. His comments come at a precarious moment. Eighteen months of interest-rate increases have yet to significantly dampen the U.S. economy, and fears of a “higher for longer” world have pushed Treasury yields to a 16-year high, causing mortgage rates to soar.

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