Market Size Blog by Editorial Code and Data, Inc.

Home equity lines of credit, also known as second liens, are part of the overall financial sector and part of the troubled housing sector as well. The bursting of the housing bubble in early 2008 started what became a worldwide financial crisis which is still destabalizing financial markets around the globe to this day. The housing market in the United States is still very unstable with an estimated 23% of mortgage holders owing more on their mortgages than the current value of the asset for which the loan was acquired (e.g. they are underwater). Of mortgaged properties that are underwater, approximately 40% also carry a home equity line of credit worth an average per property of $65,000. We should expect to see continued write downs within the banking industry related to the housing crisis for some time to come.

Today’s market size is the value of bank holdings in home equity loans as of the first quarter of 2011.

Geographic reference: United States
Year: First quarter of 2011
Market size: $624 billion
Source: Gretchen Morgenson, “2nd Loan, 2nd Wave of Losses,”, The New York Times, July 17, 2011, page B1.
Posted on July 26, 2011

A reverse mortgage is a loan mechanism that allows the owner of a home to borrow against the value of that home. This is done while the home owner and borrower continues to live in the home, maintain the home and pay the taxes owed on the home and property. To qualify for such a loan the borrower must be at least 62 years of age.

While the first reverse mortgage established in the United States proportedly dates back to 1961 it was the housing bubble of the last decade that brought this form of lending to the public’s attention. And, as with so many things that blossomed during the distortions of the real estate bubble, the rose is off the bloom of reverse mortgages. The two largest providers of reverse mortgages have exited the business during 2011.

Today’s market size is the dollar volume of the reverse mortgage business in the United States in 2001 and 2010. Worth noting is the fact that while these two points in time show a significant increase in this business, the peak came in 2009.

Geographic reference: United States
Year: 2001 and 2010
Market size: $0.5 and $10.3 billion respectively
Source: Tara Siegel Bernard, “2 Big Banks Exit Reverse Mortgage Business,” The New York Times, page B1, June 18, 2011, available online here.

Original source: Reverse Market Insight

It should not come as a surprise to see that the U.S. has dramatically increased its national, total mortgage debt over the last few decades and in particular over the last decade. The graphic presented here shows the increase in national mortgage debt from 1960 to 2009. The most stiking leaps in indebtedness are seen in the period since 2000. While not surprising since we all now understand that the last decade was indelibly marked by a housing bubble, it is sobering to see just how high that debt really is, well after the bubble has burst.

The graphic depicts inflation adjusted dollars so what we see here is the increase in mortgage debt AFTER INFLATION. Just for fun, the graphic also shows—with an orange dot per year—residential mortgage debt on a per capita basis, using the right scale on the chart. We are certainly an indebted people.

Geographic reference: United States
Year: 2009
Market size: $14.3 Trillion, of which $10.8 Trillion is residential mortgage debt as opposed to commercial or agricultural mortgage debt.
Source: “Table 1191 — Mortgage Debt Outstanding by Type of Property Holder: 1952—2009,” Statistical Abstract of the United States: 2011, available online here.
Original Source: Board of Governors of the Federal Reserve System, “Federal Reserve Statistical Release, Z.1, Flow of Funds Accounts of the United States,” March 2010, available online here.
Full Source Note for Graphic: “Table 1191 — Mortgage Debt Outstanding by Type of Property Holder: 1952—2009,” Statistical Abstract of the United States: 2011; Population data 1960-1970: “No. HS-1. Population: 1900-2002,” available online here; Population data 1980-2009: “Table 7. Resident Population by Sex and Age: 1980 to 2009,” Statistical Abstract of the United States: 2011, page 11 available online here. The price deflator series used to convert current dollars to constant 2009 dollars came from two spreadsheets. For 1960: “Table 7.14. Chain-Type Quantity and Price Indexes for Gross Domestic Product by Sector,” Bureau of Economic Analysis, February 28, 2003 available online here.; For 1970-2009: “Table B-6. —Chain-type quantity indexes for gross domestic product, 1962-2010,” Economic Report of the President: 2011 Spreadsheet Tables, U.S. Government Printing Office, available online here.