Wednesday, October 17, 2018

Housing: Part 325 - Lending and the Housing Market

I don't know if I have shared this graph before.  I think there are some interesting things to see here regarding lending and housing.

Surprisingly, the number of mortgage accounts outstanding continues to decline.  In early 2008, there were 98 million mortgages outstanding.  That dropped to about 81 million in 2013.  Today there are just under 80 million.  Since 2015, the number of owner-occupied homes has increased by about 3 million and the homeownership rate has finally leveled off.  This has happened in spite of lending markets.  That net gain in homeowners consists roughly of 4 million additional households with no mortgage and a decline of 1 million households with mortgages.

Sources: New York Fed Quarterly Report on Household Debt and Credit,
Census (HVS), Fed Financial Accounts of the United States
The average mortgage size has been growing, but home prices were rising more quickly, which has helped home equity levels recover to pre-crisis levels.  Now, home prices and mortgage sizes are rising at about the same rate.  But, since there continues to be a shift to owners with no mortgage at all, average home equity levels continue to rise.

It certainly could be the case that there is a baby boomer effect here, and that there is some growth in new mortgaged ownership, but that it is matched by baby boomers who are making the last payment on old mortgages and moving from mortgaged ownership to unmortgaged ownership.

But, I'm going to step out on a limb here and suggest that this doesn't look like a lending market in a healthy recovery, let alone a lending market that is in need of a macroprudential clamp down.


  1. Great post.

    You know, a strange thought occurred to me.

    Pre-2008, most home lenders were selling mortgages. So it should not have been the frontline lenders that were exposed to a decline in house prices, but the buyers of pools of securitized mortgages.

    It seems to me a macro prudential measure would be to insure pools of mortgages against default, and to develop measures to allow for speedy remediation of mortgages in default.

    There was a CDS market in mortgages, but it was not backstopped by a federal guarantee, or lender of last resort. That is my recollection, but the years have been going by.

  2. OT-- housing starts are slowing, rent seems soft, house prices perhaps softening. The last two months of retail sales sluggish.

    Perhaps it is too soon to be a Chicken Little, but there are some signs out there....

  3. Tangent: I wonder if the fall in our birth rate can be partially tied to the drop in home ownership - each over the last decade.

    1. Plus high rents. I agree that this is plausible.