Every three months, the Federal Reserve gives us the massive Financial Accounts Of The United States, statistical release Z.1, the flow and landing place of every dollar in our economy.
Zebra-One has no spin, just the facts. This newest release is through the fourth quarter of 2015. Although the report has always lagged a bit, it’s worth the wait because buried in it is the best-available accounting of mortgages, which itself is often the best set of indicators for real estate markets of all kinds.
Aggregate home equity has been restored
Within Z.1, schedule B.100 recites the big numbers:
- U.S. homes owned by households: $22 trillion, just about back to bubble-peak in 2006.
- We owe just under $10 trillion, still $1.5 trillion below bubble-peak.
Thus, we have restored our aggregate home equity the hard way: paying down by amortization — and, painfully, by foreclosure.
Home mortgage balances are growing, MEW steady, HELOCs and MBSs falling
L.218 has the home mortgage detail, and it tells several stories.
First, an antidote to those yelling “Too much debt!” Total home mortgage balances began to grow at the end of 2015 for the first time in nine years, and at that less than 1 percent annually.
Mortgage equity withdrawal (MEW) measures cash delivered to households by the excess of sales equity receipts over new down payments and refinances, minus amortization and write-offs. As the bubble inflated, in some years MEW added 10 percent annually to household disposable income.
MEW has been negative to barely break-even ever since the bubble blew, and it still is a net headwind.
Grossly misused home equity lines of credit (HELOC) balances are still falling, at a pace of $40 billion annually versus a remaining balance of $642 billion.
The Federal Reserve’s residential mortgage data for Q4 2015
Balances for private-label mortgage-backed securities (MBSs) — not always toxic, but the classification for subprime mortgage securities — are also still falling, about $80 billion annually.
Little new supply; $605B outstanding
There is very little new supply (a handful of new jumbo issues), and constant subtraction by home sales and payoffs of old loans, and foreclosures still grinding away.
Now, $605 billion outstanding, a shadow of the $2.2 trillion at the peak. We have over-tightened there, thanks to Dodd-Frank — legitimate jumbo loans too hard to do, and no home for loans with big down payments but non-Fannie incomes.
About two-thirds of all home loans — $6.1 trillion — still rely on Fannie-Freddie-FHA-VA. All of the mortgages held by U.S. banks and credit unions combined are less than half the “agency” total.
This is good news and bad news. U.S. housing is not remotely near another debt bubble — credit is still too tight. Which means to me that the current housing expansion has a long way to go.
Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.
