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Market Sizing Question: US housing mortgage market ($)

Someone asked on Oct 24, 2018 - 2 answers

I am looking for ideas on how to structure the following market sizing case:

- US housing mortgage market ($)

All ideas are welcome!

Thanks

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Pedro replied on Oct 24, 2018

I'm thinking about the following approach:

- US Pop = 320mn

- Avg People / Household = 3.2

- US Households = 100mn

- Percentage of house ownership = 60%

- Households on a mortgage = 40mn

- Average household value = $1mn

- Total mortgage debt = $40 trillion

It is a simplification of the problem I thought about as I do not have a deep understanding of the mortgage market.

Elias
Expert
updated his answer on Oct 25, 2018
Experienced strategy consultant, now running own consulting business

Pedro's approach is good, yet the assumptions are questionable.

I would put average household size far below 3, more in the direction of 2, maybe 2.5. Makes the math a bit harder, but not terribly so.

Average home value 1 mn? Are you kidding me? I'd assume that it's somewhere around 200-300k.

Also, don't forget that most people don't do a 100% financing, but maybe have 10-30% in collateral.

So with these assumptions (HH-size 2.5, avg home value 250 k, avg mortgage 200k, rest unchanged) I arrive at about 10 trillion.

Cheers

Elias

PS: That answer is A LOT closer to the truth, actually. https://www.marketplace.org/2018/02/13/economy/divided-decade/fed-uneven-housing-recovery-great-recession

(edited)

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