Percent Owner Occupied Households With Mortgages
Submitted by
CalculatedRisk on Tue, 11/13/2007 - 5:29pm (82 comments)
in
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 12 members and 150 guests online.
Recent Recommendations
< 1/4 now, not 1/3, have no mortgage?
Did I read that right?
$300,000 to $499,999
9,785,782
that number sure stands out
right at conforming for gse
Oh lookey...frist psot
Thanks CR, lots of numbers to run through
CR,
Is the second chart showing amounts outstanding of mortgages or value of home still maintaining a mortgage?
The market doesn't care, whats the point of this blog?
"The market doesn't care, whats the point of this blog?"
Why are you here?
"The market doesn't care, whats the point of this blog?"
I think that's their problem, knowledge is power.
"The market doesn't care, whats the point of this blog?"
It's more fun watching the Ship of Fools sail by if you take the time to understand their individual personalities.
Dan,
Go read Graham and Dodd and never forget Graham's dictum:
In the short run the market is a voting machine, in the long run a weighing machine.
Just Stop
"If something cannot go on forever, it will stop." - Herb Stei
The market doesn't care, whats the point of this blog?
Which market?
I know of some shady individuals who were bearish on the dollar and bullish on treasuries due to economic reasons and went on to make an absolute killing this year (so far - they'll probably lose it all next month).
The stock market is much more like a poker game than other markets until one fateful day when reality finally catches up.
Dan actually has a point. When we talk about "the market," we think we know what we mean, based on experience. But really, we don't.
Nobody has EVER seen a market like this before. This market has just been whipped into a frenzy based on leverage, speculation and manipulation, mostly by hedge funds and prop desks. It has nothing to do anymore with rational reasons for investing, least of all by individuals. Any time there's money to be made in a few hours time, the frenzy begins again. Apparently, it's so easy to find more funds to pump into the market, with most of it coming from various forms of leverage.
At some point, the smart hedge funds start to take chips off the table, or shift them from red (long) to black (short). Until then, Dan's right. The market doesn't care.
I am here because I believe the message and appreciate the knowledge.
I am frustrated because my positions aren't working out the way I'd like them to. The markets just don't care.
DCRogers - it stinks when you aren't just watching...
Yes, the market doesn't care, so what? If your world is narrowly defined to the stock market or even the broader financial markets, then yes, there are other blogs for you. Most of the readers of this blog are interested in the markets, but also interested in the why of what they're doing.
Nobody has EVER seen a market like this before. This market has just been whipped into a frenzy based on leverage, speculation and manipulation, mostly by hedge funds and prop desks. It has nothing to do anymore with rational reasons for investing, least of all by individuals. Any time there's money to be made in a few hours time, the frenzy begins again. Apparently, it's so easy to find more funds to pump into the market, with most of it coming from various forms of leverage.
Actually what you're describing is very typical of late stage speculative markets where many of the legitimate investors are gone and only the hard-core speculators and "moron longs" are left.
The behavior of the markets appears to degenerate and become divorced from reality.
Based on a historical perspective, nothing the market has been doing recently is all that surprising or unprecedented.
The last thing you would expect, in fact, is for the market to decline in a smooth linear fashion in response to negative news.
Not surprisingly, that hasn't happened.
I am frustrated because my positions aren't working out the way I'd like them to. The markets just don't care.
Anybody can read the newspaper and see that bad things are happening, but there's only so much money that can be made shorting stocks.
So it then becomes a fight over how to get that money and lots of confounding things happen with everybody fighting over the scraps.
It's like being at a carcass with a thousand other hungry wolves. Don't expect it to be easy to get your share.
ac, and others,
There's one thing being missed here. The Fed and treasury are doing their damned best to do an old school Keynsian number here. Namely, sheppard a decline in the dollar.
This does two things. Increases paper profits of US corps, and decreases the global value of US wages. In the short term, it looks good. The problem is that so much of what is produced in this country is imported, that once inventory slack is taken up, the costs of producing stuff increases without concern to US wages.
The other point here is that the vast majority of financier's and Wall Street players are very Keynsian in their theoretical understanding of economics. So they see this play and think that the economy will turn around, and everything is up up and away.
The problem is that Great Britain tried this in the 50's and 60's when it's empire was in serious decline. That didn't turn out so hot for them. It likely will be similar for the US.
Cheers,
Mish,
Apologies for earlier question directed wrong. In bouncing between sites, I sometimes lose track of where I am. You have a great blog and I appreciate you time and effort put forth.
KnotRP, just under 1/3 have no mortgage.
23,852,315 divided by 75,086,485 equals 31.8%.
Meltdown Man, I believe that is the value of the house. Amazing how many houses are under $50K!
Best Wishes.
Mish,
Apologies for earlier question directed wrong. In bouncing between sites, I sometimes lose track of where I am. You have a great blog and I appreciate you time and effort put forth.
This is my favorite post from today.
Banker,thanks for the quote.don't forget that there is a thumb on the scale sometimes.
If you want to see some cheap houses, go to the countrywide reo listings. In Michigan alone they have about 250 houses listed for under $5,000. What I can't believe is that there was a mortgage to foreclose on for those places.
My more general comment on this and last post is that it seems the only way to avoid a consumer slowdown is to convince the last remaining responsible people to cash out their equity and buy junk they don't need. I prefer a recession to that.
Dan,
Go read Graham and Dodd and never forget Graham's dictum:
In the short run the market is a voting machine, in the long run a weighing machine.
Banker
Banker, I have a confession to make. You've posted that many times, and I still don't know what it means.
Could you explain for those of us who don't yet understand?
Thanks,
g
Looks like only 24% of houses valued >= $200,000 have no mortgage.
giacutter,
It basically means that in the short run sentiment or opinion governs the market (voting), but in the long run business performance is measured (weighing). In the long run a given stock price will conform to the actual operating results of a business. Looking at short-term market gyrations is a chimera.
Does that help?
"I am frustrated because my positions aren't working out the way I'd like them to. The markets just don't care."
The markets job is to take the most amount of money from the most amount of people in the least amount of time.
The market doesn't know what you are in and it doesn't care it's job is to take your money.
Look at that:
China's retail sales grew at the quickest pace in at least eight years as decade-high inflation boosted prices and rising incomes encouraged spending in the world's fastest-expanding major economy.
Sales rose 18.1 percent in October from a year earlier to 826.3 billion yuan ($111 billion), the National Bureau of Statistics said today, after gaining 17 percent in September. That beat economists' forecasts for unchanged growth and was the biggest increase since 1999 when the government started releasing the numbers.
Inflation usually gets people to spending money because they know the money's not safe in the bank. That's part of the idea behind lowering rates to stimulate consumer spending (by creating negative real interest rates).
Of course this is an especially perverse tactic to use in an economy where consumers already have insufficient savings.
Not trying to give anyone any ideas.
China's Retail Sales Grow at Fastest Pace Since 1999 (Update4) - Bloomberg.com
i myself find it very hard to believe that Goldman will have no writedowns given all the other banks admissions. they may be smart but to expect them to be the only ones in the room after so many yrs of gorging in the trough to be clean as a whistle of the toxic cdo crap is unbelievable. i went short them today. yes it may be a long hard slog to the finish line with this one but i think the truth will come out sooner than later.
Don't you have a fantasy football team to arrange, or something?
And for that matter, tracking macro economic trends can be quite like fantasy football, except you (1) cannot pick your players, (2) you can lose really big money, even if you pay close attention, and (3) you cannot quit the game
.
CR, is there any historical data? Link didn't work on my iPhone.
Anonymous,
The markets job is to take the most amount of money from the most amount of people in the least amount of time.
The DJIA has gone from 800 in 1980/81 to 13,000 today. That's what, 15 times your money? Geeze, it can "take" all my money at that pace
"That's part of the idea behind lowering rates to stimulate consumer spending (by creating negative real interest rates)."
not to mention rampant stock speculation by cab drivers, cooks, waitresses, grandmas etc. oh and not to forget Japanese housewives.
Didn't read it right...that was total, not mortgages. Thanks.
It gets back to a riddle a hedge fund manager told me. There's three hedge fund traders sitting at desks side by side. One trades precious metals. Another trades oil. The other trades stocks.
Which one do you expect to make the most money?
The answer is...whichever desk has the most volatility.
idoc, Banker is looking cross-eyed at you for your short of GS.
May you prove him wrong, sir!
Good night.
Everybody needs to be up at 7:00 AM sharp (EST) to ramp up the futures.
Let's not have another repeat of last Thursday.
See you then.
this is an okie just sayin i bought a home for 65K and it rents for 800/mo. oh and its paid off, so put me in that category.
I really don't understand the ridiculous prices and lackluster rents in the SoCal area.
Today was rotten, rotten, rotten.
Let's hope for better tomorrow...
Man, I hate California: looking at the ACS that CR pointed out, only 18% of homeowners spend $2,000 or more per month on housing costs.
I gotta convince my San Diego-native wife that we need to move to Tennessee or some other sane place.
Oh, did I mention: I hate California.
GS "i went short them today."
Your to early bro.
given Bankers ideas this past yr i'll bet my portfolio is way higher than his
no offense Banker! always enjoy your comments.
perhaps GS will allow me to give it all back. however, with imploded cdo ,RMBS and CMBS mkts GS cannot possibly increase earnings on trading profits alone at its current all time high share price IMHO. besides its admission of being short the mortgage mkt gives me even greater faith in all my other HB and lender shorts.
you've got to be a contrarian.
That's what, 15 times your money? Geeze, it can "take" all my money at that pace
"Over the past century, a gradual move from owners' capitalism -- providing the lion's share of the rewards of investment to those who put up the money and risk their own capital -- has culminated in an extreme version of managers' capitalism -- providing vastly disproportionate rewards to those whom we have trusted to manage our enterprises in the interest of their owners."
Jack Bogle - The Battle for the Soul of Capitalism
Well, gee whiz, color me dumb, but it would seem to me that one could use this census data to arrive at a fair estimation of the equity in unmortgaged homes and, by difference, the remaining equity in mortgaged homes. Or, am I missing something?
Looks like only 24% of houses valued >= $200,000 have no mortgage.
Doctor Zoidberg
check your math, pls
CR- "Amazing how many houses are under $50K!"
Conjure Bag says, "There's a whole lotta slummin' goin' on."
Does anybody read the paper version of the WSJ or am I one of the few remaining dinosaurs? I'm surprised that the page D1 article about reverse mortgages did not receive any attention here in today's comments. Two things that caught my eye were the graph of the number of RMs (hockey stick shape) and the reference to the Ginnie Mae announcement of the first ever standardized RM backed bond issue (HMBS).
FHA RMs expanded from 18k in 2003 to 108k in fiscal year 2007. A back of hand calculation assuming an average RM of 100k net yields $10B additional cash to the economy. Not much now, but worth watching as the boomers age.
Below is a press release regarding the Ginnie Mae announcement. All the usual benefits of government support of this market are touted. However, I can't help but wonder if the seeds of the next real estate bubble have been planted.
Here is the press release:
Ginnie Mae Guarantees First Home Equity Conversion Mortgage Mortgage-Backed Security | All American Patriots: Politics, economy, health, environment, energy and technology
This link discusses the development of HMBS.
Ginnie Mae: Media Center
BTW, I guestimated about $4.5 trillion worth of homes mortgage free using CR's numbers. That's a considerable sum waiting to be mined or tapped via a creative marketing campaign of some sort.
Plotting this in OpenOffice Calc, it's pretty easy to see the number of non-mortgaged households has a low-value density peak, at around 100,000 (thought the median is skewed higher by a long tail).
Getting a rough estimate using the data table, non-mortgaged home value is roughly 5.7 tril, and mortgaged value is about 16.4 tril. The sum of these roughly matches the ~22 tril total estimated home values by the government.
Last I checked, mortgage values totaled 10-11 tril. This means that for the average mortgaged home, about 2/3 of it is bank-owned. The applicable homes for these cases is toward the higher end of the valuation scale.
BTW, I guestimated about $4.5 trillion worth of homes mortgage free using CR's numbers. That's a considerable sum waiting to be mined or tapped via a creative marketing campaign of some sort.
Assuming prices don't retreat...
great work everyone
The DJIA has gone from 800 in 1980/81 to 13,000 today. That's what, 15 times your money? Geeze, it can "take" all my money at that pace
How's your Texas Corp, Sears, US Steel, Westinghouse, Woolworth, et al doing in your 15x calculation? Survivor's bias sir.
Conjure Bag thinks CR is going to be using the rest of his evening to crank through multiple issues of the American Community Survey looking for correlations with Federal Reserve data.
CR, Conjure and I eagerly await the publication of your findings.
dryfly,
Even a 33% reduction of prices leaves $3T to tap, still considerable. On a related note, I'd like to understand how Ginnie Mae minimizes risks involved with backing RMs and protects against falling prices. Probably won't have time until the weekend, if at all, to research it further.
Best,
"Amazing how many houses are under $50K!"
Over 600 SFRs for sale in the Buffalo area for less than $50k. And now with free asbestos.
Robert Cote,
They are included of course! No survivors' bias at all.
ac said "what you're describing is very typical of late stage speculative markets.."
I agree with ac except for the fact that this bubble is the biggest of all time. And I am not sure that governments have taken such extraordinary measures to hold up the market before a major correction. Witness the vast sums loaned by the Fed to Countryfried and from the Bank of England to Northern Rock.
I am ready to be proven wrong if someone will give me an example.
Bystander- "I agree with ac except for the fact that this bubble is the biggest of all time."
Conjure Bag says, "Oh man, you should have been around for the tulip bubble. Now, that was crazy."
Subtracting Lee Helm's $5.7 trillion non-mortgaged home value from the $21 trillion (CR's previous post) total home value leaves $15.3 trillion, versus $10.1 trillion of mortgage debt. If we assume that, going forward, it will be difficult for anyone to mortgage themselves up past, say, 90% LTV, the mortgageable value of mortgaged homes is only $13.8 trillion -- leaving only $3.7 trillion of theoretically extractable equity. A 20% decline in real estate values would essentially wipe that out.
I'd like to understand how Ginnie Mae minimizes risks involved with backing RMs and protects against falling prices.
I'm guessing with really reasonable sound policies that will turn out to be mainly smoke and mirrors when the unexpected downturn comes.
A 20% decline in real estate values would essentially wipe that out.
And since we're talking about 2006 survey, perhaps a large fraction is already gone?
jm's arithmetic certainly sounds reasonable.
Conjure Bag seems to agree that the magic number is around 20%. If it's more than that, game over.
Even a 33% reduction of prices leaves $3T to tap, still considerable.
Not really - or let's hope the answer is 'not really'.
I have no doubt that retirees will tap into their equity as they age... but I would certainly hope if not expect the younger generation would be saving and increasing their equity at least as fast as their elders tap, no? The two lines should be crossing and keeping a minimum baseline of equity if not increasing net equity...
I shudder to think what the US would look like with a net ZERO EQUITY... that's what would have to happen to 'liberate' that 3-4 trillion.
If we take that estimate, that 2/3 of mortgagees' value is borrowed, and we distribute it equitably into third-tiles (?), we'd get something like 17 million who owe 1/3, 17 million who owe 2/3 and 17 million who owe 3/3. It would suck to be that last 17 million right now. They are kind of the "crown" of the housing bubble.
It will take a lot less than 20%. 10% for any length of time is more than enough. If wish I could find the CR discussion when I first published the non-mortgaged home values data. 1/3rd have no encumbrances. Another 1/3rd have the equity and incentive to ride out a decline. It's that last 1/3rd that will price all homes on the margin as some foreclose or short sell.
I am soooooo glad that our home, bought in 1980, is paid for and we have never tapped it for money - our savings (~$15k/year in 401k, iras, seps, ...) make me feel relatively comfortable (aside from helping our son pay for medical school).
Hmmm... why haven't any hedge funds blown up lately?
Well two things are not happening anymore.
1) property (investor)flippers are gone: no extra income there
2) Families who would flip every two years to take advantage of tax savings will not be doing it for a while: lost income there too.
So if MEW stays strong, we still have
the multiplier effect of lower incomes to deal with, especially if
MEW is stable or slowing due to property value decreases.
jm's arithmetic certainly sounds reasonable.
mp | 11.14.07 - 12:37 am | #
Ya we've reached 'Peak Equity' and gone past it! LOL!
Slightly OT, per the Credit Suisse table from CR (Oct. 22), there are about $2T loans that have resetting interest rates or payments over the next several years. Thats about 20% of the ~$10T total mortgage value and 10% of the total residential RE value.
It would seem that the loans of greatest concern are those made in the last few years; those that were high LTV to begin with and which are going to go well over 100% as values go down. But absent a trigger (e.g. a jump in monthly payments) almost all homeowners would try to weather the jump in LTV due to lower value since (a) its their home, and (b) they dont really have any options.
Obviously, 10% of housing becoming REO would be catastrophic, so fed policy has to focus on what can be done to bring that down to a tolerable level. One of the biggest challenges is that even a baseline rate of homes going on the market could be a significant factor, and if people start losing jobs that will be another trigger to sell (where giving the keys back to the bank is a form of a sale).
As a retired engineer, I have no idea of what that policy may be, but its success is critical, and Im hoping that the clever minds that make up these comments can contribute.
Robert's point is one I've been making for quite a while -- this bust will leave mortgaged homeowners with zero or negative equity.
Housing prices, especially those in bubble areas, have over time grown far beyond 2.5x median based upon ever increasing equity trade-ups. No more.
picosec - I hate to bum you out but I wouldn't be surprised to see some of what you described happen & result in a big flood of REO.
But my guess is there is no plan, no policy, not even a realization of how big the potential problem could become. The administration, congress & the fed are basically winging it...
Well not 100% true. They might cut the federal funds rate some more and there is MLEC and raising the conforming loan limit at fanny & freddy. At this point that's pretty much the sum of the policy I think... You think any of that will have a big effect?
I mean what else can they do other than shrug?
picosec,
If you're holding out hope for a government housing policy that does more good than harm, I've got a bridge to sell you.
Using data from a comment on a more recent thread (Countrywide Commercial Real Estate Loan Pipeline), according to
Forbes.com File Not Found
the amount of mortgage loans made during 2006 alone was around $3T. Makes my earlier estimates look pretty weak and the potential a lot scarier.
Make that link:
Forbes.com File Not Found
Some of the Chris Cagan papers at Studies, Briefs and Presentations - First American CoreLogic, Inc.
have very detailed info on equity profiles.
Thanks jm, it looks to be very useful.
I just got two ink cartridges in today's mail so I'll even be able to print it out.
Of course, the cost of ink cartridges is cutting substantially into my investment return.
CR - could you fix the link?
I'm curious as to how they define a 'housing unit'. There do seem to be far too many in the
CR - could you fix the link?
I'm curious as to how they define a 'housing unit'. There do seem to be far too many in the LESS THAN 50k (damn, you less-than sign) category.
I am wondering if 'double-wides' are being included here....
New Math,
I would check yours