May housing starts up 22%, Homebuilders smile

👋 Happy Wednesday! Welcome back to Mortgage Nuggets. Hope you enjoyed the long weekend as much as we did. Today's newsletter is 706 words, a 3-minute read.

1. May housing starts up 22%, Homebuilders smile

Homebuilders are responding to an increase in new home sales and a shallow level of existing home inventory by getting a jump start on new projects. Privately-owned housing starts in May 2023 checked in at a seasonally adjusted annual rate of 1.63 million, about 22% above the revised April 2023 estimate of 1.34 million, according to the U.S. Census Bureau.

• There are now 1.69 million single-family and multifamily housing units under construction in the U.S., approaching the highest levels recorded in the last 50 years.

Housing economists agree that market dynamics have turned the tides in builders’ favor over the past 12 months, as homebuyers frustrated with still-limited existing inventory take a closer look at new homes. Yesterday, the National Home Builders Association’s builder confidence index surpassed the midpoint of 50 (out of 100) for the first time since July 2022, confirming the return of a brisk market for homebuilders.

2. HUD proposes new rules

The U.S. Department of Housing and Urban Development (HUD) is set to propose more than 50 new rules as part of the federal government's 2023 spring regulatory agenda. Most of these rules aim to streamline access to HUD programs and modernize its processes.

• For instance, one rule intends to enable people with criminal histories who don't pose a risk to others to access HUD housing programs.

• Another rule targets the modernization of interactions with defaulting mortgage borrowers, transitioning from in-person meetings to phone or videoconferencing options.

• Another rule in the final stages seeks to amend the registration process for branches that originate mortgages and/or submit applications for insurance.

Further, HUD plans to alter the delivery of housing counseling services to acknowledge advancements in technology, potentially eliminating the need for physical offices in all service areas. Instead, co-working spaces, libraries, and other community facilities could be utilized.

3. More Nuggets

Institutional firms are pulling back from the U.S. housing market - just look at Starwood’s decision to sell 2,000 single-family rentals. (Fortune)

Parking is making the housing crunch worse. There's more square footage in the U.S. devoted to parking cars than housing humans. (Vox)

Despite obstacles, the homeownership rate for below-median income households has increased to 53% from 48% since 2016. (Freddie Mac)

4. Mortgage applications for new homes soar

Mortgage applications for new home purchases rose 16.6% in May from a year earlier, marking four straight months of year-over-year increases, the Mortgage Bankers Association (MBA) said Tuesday.

The MBA’s Builder Application Survey (BAS) data for May 2023 also found that applications increased 8% from April, unadjusted for typical seasonal patterns.

“Purchase activity for newly built homes was strong in May, with builders continuing to bring homes to the market and buyers keen to act on available units,” said Joel Kan, MBA’s deputy chief economist. “Applications for purchase loans were up on a monthly basis and increased annually for the fourth consecutive month. Our estimate of new home sales also jumped in May, up 16% to the fastest pace of new home sales in 15 months.”

5. Homeownership is now $1,000+ per month more expensive than renting

Owning a starter home is now $1,000+ per month more expensive than renting one. While the metric has decelerated from a $1,188 peak in October 2022, it remains far above historic levels, according to John Burns Research.

Factors such as high mortgage rates and elevated resale prices continue to challenge for-sale housing affordability. This results in a higher-than-usual number of home renters staying in place as they can’t make the numbers work in such a challenging housing market.

The data varies significantly by market, but the cheaper markets in the Midwest are more obtainable.

☀️ See you on Friday!

👀 1 other thing: A tourist submersible recently went missing while on its way to visit the Titanic's wreckage ... it's quite spooky. Live updates are available here.

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