Thursday, February 12, 2009

Mortgage Debt Outstanding 1952 - 2007

If you look at Census data for total mortgage debt outstanding during the 55 years spanning 1952 to 2007 you will see that total mortgage debt outstanding grew at a 9.7% Compound Annual Growth Rate (CAGR) for the 55 year period.

Mortgage debt for single family homes grew the most--from $58 Billion in 1952 to $14.5 Trillion in 2007--A 10% CAGR over 55 years!

Multi-family mortgages grew at a 8.1% CAGR over the past 55 years, while Commercial Mortgage debt outstanding grew at 9.8% CAGR and Farm land mortgage debt outstanding grew at a 5.2% CAGR over 55 years reaching $117 Billion in 2007.
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If you look at the last 20 years more closely---you'll see that the growth in home mortgages has grown at an even faster clip. The CAGR for home mortgage debt outstanding for single family homes from 1997 to 2007 was 11%

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What you can see if you look at the annual growth rate in mortgage debt outstanding you'll see that over the last 55 years, the growth rate for single family home mortgage debt outstanding was teh most consistant and was never negative (Like Multifamily, Commercial, and Farm mortgage debt outstanding).

If you do a little "What-if"/"Scenario-Analysis"---And ask, "what if for the last 10 years (1997-2007) Household mortgage debt outstanding did not grow at the 9.2% CAGR which it did---but instead grew at the 6.6% CAGR seen in Commercial Mortgage Debt outstanding (1997 to 2007)---Well if that were the case, instead of having $11.1 Trillion of mortgage debt outstanding in 2007 for single family homes---it would have been $7.4 Trillion of mortgage debt outstanding for single family homes---That is a 34% difference!

Said another way---cheap mortgage debt thrown at millions of Americans households during the last decade likely has inflated home values by at least a third (as of 2007).

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