The U.S. Mortgage Market: Chart Edition

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by: David Beckworth

Thursday, I interviewed Nick Timiraos of the Wall Street Journal for the Macro Musing podcast. He is on the Fed beat now, but covered the GSEs during and after the financial crisis for the paper. Consequently, he has an encyclopedic knowledge of Fannie Mae (OTCQB:FNMA), Freddie Mac (OTCQB:FMCC), and the other GSEs. His knowledge and experience were the basis of our conversation Thursday. It was a fun show and should be out in about a month.

I wanted to share some figures I collected on the U.S. mortgage market in preparation for the show. They come from an amazing monthly report on housing from the Urban Institute called Housing Finance at a Glance. These figures provide a peek into my conversation with Nick.

Consider first the historical share of mortgage debt outstanding by type of institution. This chart is actually mine from a few years ago. There are three key takeaways from it. First, the GSEs gain most of their market share in the wake of the S&L crisis. Second, the GSEs actually lose market share to the private label security (PLS) providers during the housing boom period. These PLS providers - the red line in the figure below - gained market share during this time by tapping into the Alt-A and subprime mortgage market. Eventually, the GSEs followed suit, but it was the private label security providers who went there first and did most of the damage. Third, the GSEs gain market share back as the PLS supply folded in the crisis.

Next, if we look just at the share of securitized mortgages - which today makes up about 2/3 of all mortgages - we see the dominance of the GSEs over PLS today. This can be seen in the figure below from the Urban Institute report.

The Urban Institute also provides the dollar amount of the mortgage market going to the GSEs and other sectors. The remarkable decline in PLS is evident here too:

The Urban Institute also provides details on the types and sources of securitized markets:

Finally, for those curious, the Urban Institute has a nice chart summarizing the total value and equity of the U.S. housing market. This chart reports that the U.S. housing equity turned positive again in 2013 and currently stands at $15.2 trillion compared to household debt level of $10.6 trillion. Happy days are here again for U.S. housing.

Again, these charts are just a small part of my conversation with Nick. It should be out in a month or so. In the meantime, check out the entire Urban Institute report.

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