A Unified View of the Role of the Mortgage Agencies in the Housing Market

There is a natural tendency to think about housing finance in a bifurcated manner: single- and multifamily. But this distinction is hardly clear. For a long time, we’ve had condos and coops, and more recently new esoteric property types like buy-to-rent. The mechanics are quite distinct but, in each case, we are talking about debt and equity, borrowers and lenders and servicers. But mostly we are talking about places to live.
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In scaling the two types of residences, we normally look at dollar amounts. From the Federal Reserve Z1 data[1], we can see that Agency single-family debt outstanding stood at $9.038 trillion in Q4 2023 while multifamily just crossed the trillion-dollar threshold at $1.002 trillion, giving a ratio of 9.02. Single-family dominates. In terms of the agency share of these markets, we have:

The Agency share for single-family debt in Q4 2023 stood at 65.0%, for multifamily at 46.3%, and combined at 62.5%.

Now let’s move on to residences. In this case, our fundamental unit is the household, not dollars. According to the US Census Bureau, the number of households in the US in the 2022 American Community Survey was 129.9 million[2].  What we want to do is to break the market down into households that occupy single-family homes vs. apartments and look at the Agency share of each. To do this, we need to obtain property data that provides such a breakdown, and this is available from the American Housing Survey[3] for which we have data for 2021. Here we have a total of 128.5 million units, quite close to the number of households[4].
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Finally, we break down the mortgage coverage into the number of units. For both single-family(1-4 unit), and multifamily, the agency disclosure data includes the number of units for each property[5]. Altogether this gives us the same template as the charts above, but this time in units:

There are two main takeaways here. First, multifamily is more significant by unit count (3.4:1) than by dollar share (9.0:1). An interesting follow-up question that arises is what share of housing is covered that supports structures that are affordable to lower-income households (less than 100 AMI). A challenging task we will take on in another article.
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Second, we can bifurcate the housing market into that portion covered by agency-guaranteed debt and that without. The former is covered is a significant share (41.1%) of the total but less than half. The remainder consists largely of single-family homes without debt, or with debt but without an agency guarantee (largely loans held on bank balance sheets), and multifamily units in structures without debt or with unguaranteed debt. The natural question that arises here is how representative a sample is out of the total.

One way to approach this question is to see if the share of single-family units out of the total of single and multifamily is close to the same concept for units covered by agency debt. These turn out to be 81% and 77%, respectively. Reasonably close.

This assessment can be enhanced by performing the same calculations by state. It turns out that the sources we use enable us to do this for seven large states: California, Texas, Florida, New York, Illinois, Ohio, and Pennsylvania. The table below provides a summary by state:

There is a lot to chew on here. The states with the lowest agency coverage are, first, NY (28%) and second, Pennsylvania (32%). The highest is Texas (46%). In terms of the differences in the ratio of single to multi-family units in total vs those covered by agency debt, there are significant but not overwhelming discrepancies by state. Illinois has both ratios the same at 80%. Ohio nearby has a pretty big discrepancy with the share for all units at 86% compared to 76% for covered properties. Considering the most recent available AHS statistics for Ohio are from 2019, a larger discrepancy can be anticipated. The respective shares for California and New York are similar in that the figures for all units are less than for covered properties.
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Our main conclusion is that shifting the focus of analysis in the multifamily market from properties to units opens the door to a more holistic approach to analyzing the impact of a wide range of housing policies on the broad housing market.

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[1] https://www.federalreserve.gov/releases/z1/default.htm
[2]https://data.census.gov/table/ACSDP1Y2022.DP02?q=households&g=010XX00US,$0400000
[3] https://www.census.gov/programs-surveys/ahs.html
[4] Note that in these figures, we include 89.9 million 1-unit dwellings and 8.5 million 2-4-unit dwellings in the single-family category to be consistent with the definitions used by the mortgage agencies. We include Manufactured/mobile homes or trailers in the “other” category, along with boats, RVs, vans, etc.
[5] Single-family loans are those with 1-4 units in the property. The total number of outstanding mortgages covering 2-4 units is 0.9 million, about 2.3% of the single-family total as of February 2024.