THE BURDEN OF THE RESIDENTIAL MORTGAGE DEBT

Abstract

The amount of debt on non-farm residential real estate has been one of the most rapidly growing series in our economic history. Over the past sixty-five years the total residential mortgage debt (including debt on apartment houses) has increased from an estimated $2.3 billion to an estimated $95 billion or by not far from 5,000 per cent. Since 1890 mortgage debt has increased much faster than population and households, national income, other forms of private long-term debt, and the value of the housing inventory. Furthermore, the growth in mortgage debt has been virtually continuous-except for a few scattered years-although the rate of growth has varied substantially from one period to another. That mortgage debt has outdistanced much of the rest of the American economy can be seen in the following measures. First, the rise in mortgage debt has been more than nine times as rapid as the increase in non-farm population. In 1890, the per capita mortgage debt was $68 and in 1955, $658. Second, mortgage debt has risen nearly twice as fast as disposable personal income (measured in current dollars). In 1890 the ratio of mortgage debt to disposable income was .197 and in mid-1955, .357. Third, in 1900 residential mortgage debt composed 16 per cent of net private long-term debt and in 1952, 45.5 per cent. The residential mortgage debt is now for the first time greater than the volume of net long-term corporate debt. Fourth, the growth in mortgage debt has even been twice as great as the increase in the current value of our housing inventory in spite of-or perhaps because of-the enormous rise in the price of housing. Thus, in 1890 the ratio of mortgage debt to housing wealth-was about 15.3 per cent and in mid-1955, nearly 32 per cent.