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1 This PDF is selection from n out-of-print volume from the Ntionl Bureu of Economic Reserch Volume Title: The Volume of ortgge Debt in the Postwr Decde Volume uthor/editor: Sul B. Klmn Volume Publisher: NBER Volume ISBN: Volume URL: Publiction Dte: 1958 Chpter Title: Summry of New Estimtes nd Estimting Techniue Chpter uthor: Sul B. Klmn Chpter URL: Chpter pges in book: (p. 7-16)

2 2. SURY OF NEW ESTITES ND ESTITING TECHNIQUES New estimtes re provided in this pper for ech of the three mjor clssifictions of mortgge debt discussed previously - type of property, type of mortgge, nd type of holder. In some cses urterly estimtes hve been mde where only nnul dt were previously vilble, nd in other cses both nnul nd urterly estimtes hve been provided where no estimtes existed before. In still other instnces, where nnul estimtes were vil'ile for only prt of the postwr period under review here, new estimtes were mde for lter yers, nd erlier estimtes were chnged on the bsis of new informtion or improved estimting techniues." The extent of new estimtes developed in this study is summrized in Tble nd indicted by the symbols, nd denoting nnul or urterly figures. Within the limittions of existing informtion, the new estimtes should permit more complete nd meningful nlyses of mortgge mrket developments thn ws previously possible. Esti,ites by Type of Property The principl new estimtes provided in this clssifiction re for nonfrm mortgge debt secured by totl residentil properties, by multifmily properties, nd by nonresidentil properties. From previously published dt vilble on current bsis (nnully or urterly), which were limited to debt secured by one- to four-fmily dwellings, nd by cornbintion of multifmily nd non-residentil properties, it ws not possible to obtin seprte residentil nd non-residentil mortgge totls for nlysis nd comprison of developments in these distinctly different mrkets. Some nnul historicl dt through 1953 for the debt ctegories here estimted hve been previously published, s noted bove. Of these only Sttes ws expedient becuse dt redily vilble from published nd internl reports of the Frm Credit dministrtion re so limited. Either inclusion or exclu sion of the Bnk's frm mortgge holdings on Puerto Ricn properties is of little conseuence, for such lons mounted to only bout $22 million, or less thn 1.5 per cent, of totl Federl Lnd Bnk mortgge holdings t the end of "The new dt on mortgge debt will, therefore, not be in greement with figures in the following sources: R. W. Goldsmith, Study of Svings in the United Sttes, Princeton University Press, 1955, Vol. I; Leo Grebler, Dvid. Blnk, nd Louis Winnick, Cpitl Formtion in Residentil Rel Estte, Princeton University Press for Ntionl Bureu of Economic Reserch, 1956; nd J. E. orton, Urbn origge Lending: Comprtive rkets nd Experienre, Princeton University Press for Ntionl Bureu of Economic Reserch, 1956, 7

3 Type of property nd mortgge 1. ll properties 2. Nonfrm 3. Residentil to 4-fmily 5. FH 6. V 7. COflventiol 8. ultifmily 9. FH 10. Conventionl Nonresidentil Frm ernornd Totl FH-insured Totl conventionl TBLE Dt vilble on Net ortgge Flows, 1945 to 1956 L L HOLDERS (1) Svings & lon ssocitions (2) IN F1NNCL institutions Life insurnce compnies (3) Commercil bnks (4) utul svings bnks (5) FEDERL GENCIES (6) P1 p2 p1 p3 p1 p p1 P2 1 P2 p1 p3 t t t Q Q Q5 t - Qt Q INDIVIDULS & OTHER HOLDERS (7) LL OTHER HOLDERS (brekdown) Fire, csulty & Self- mrine dminis- Fce ortgge tered mount Type of property insurnce Frternl Credit Pcrsoii compnies pension investment nd mortgge compnies orders unions trust (8) (9) (10) funds compnies (11) funds (12) (13) (14) p1 p3 Pi P P3 P2 p1 p3 p1 p2 1 2 r1 p. I. ll properties c. S So S S S S S S S S S2 S S S S. t. - - t t.,..

4 Subcolumns: P ; see generl notes below. P = ; see generl notes. Reported figures: Estimtes: nnul Q = urterly = nnul, from other sources urterly, from other sources S = seminnul = monthly t = nnul, provided by this study t = urterly, provided by this study Generl Notes The symbols in the tble denote the types of dt (reported, estimted, nd estimted in this study) vilble on outstnding mortgge debt for vrious time periods during the postwr decde Reported figures re defined here to include those reported by mortgge holders directly to supervisory uthorities, trde ssoitions, or other groups, together with figures mde vilble by federl nd stte gencies on mortgge progrms which they dminister. For svings nd lon ssocitions, life insurnce compnies, nd mutul svings bnks, symbols denoting reported figures hve been used even though in some cses reports re not mde by the complete universe of such institutions. The lrge proportion of these institutions providing dt to the Federl Home Lon Bnk Bord, the Institute of Life Insurnce, nd the Ntionl ssocition of utul Svings Bnks, however, leves little estimting to be done, nd these figures re, therefore, considered s reported. Estimted figures, whether tken from other sources or supplied by this study, re those not reported directly by privte holders or government gencies hut re bsed on relted figures from such sources. Subcolumn P1 of ech numbered column includes ll reported figures plus nnul estimtes from vrious sources for the period Symbols for reported nd estimted figures on one line of this subeolumn indicte tht reported figures for tht type of psoperty nd mortgge re vilble for the ltter prt of the period, nd estimtes for the erlier prt. Subeolumn P1 includes only the urterly estimtes from ll sources including this study for the period Blnk boxes in this subcolumn of columns I through 7 indicte tht urterly estimtes were not reuired. Columns 8 through 14 re given only for line I, ll properties, becuse there re no reported or estimted figures for the seprte types of property nd mortgge. Specil Notes For svings nd lon ssocitions, urterly designtions under P1 on lines 1, 2, nd 6, nd for memornd items re for the period beginning Prior to tht yer, nnul estimtes re vilble from this study or from other sources. For life insurnce compnies, monthly designtions shown under P1 on lines 1, 2, 6, nd 12, nd for memornd items re for the period beginning Prior to tht yer, dt re vilble nnully. For commercil bnks, seminnul designtions shown under P1 on lines 1, 2, 3, 11, nd 12 re vilble beginning December Prior to tht dte, estimted dt re vilble nnully. Seminnul designtions on line 6 nd for memornd items re vilble only since December Prior to tht dte, nnul estimtes re provided by this study. For mutul svings bnks, the monthly designtion shown under P1 on line 1 is vilble beginning in Prior to tht dte. estimted dt re vilble nnully. Seminnul designtions shown on lincs 2, 3, 11, nd 12 re vilble beginning December Prior to tht dte, there re only nnul estimtes. Seminnul designtions on line 6 nd for memornd items rc vilble only since December Prior to tht dte, nnul estimtes re provided by this study.

5 orton's figures (see his Tble 2, p. 18) gree closely with nnul estimtes presented here, hving been tken directly from unpublished Federl Reserve estimtes for which the present writer nd members of the Bord's Flow-of-Funds Unit were responsible. Revisions of these erlier estimtes ccount for most of the differences. Estimtes presented in studies by Goldsmith, nd by Grebler et l., re significntly different from those developed here, bsed s they re on entirely different estimting techniues nd on sources since suspended. Goldsmith's postwr estimtes through 1949, for exmple, re bsed lrgely on the vlue of construction expenditures for the vrious types of property. The extension of these estimtes through 1952 by Grebler et l. ws developed "by extrpolting the 1949 [Goldsmith] estimte by the percentge increse from 1949 to 1952 in the Commerce series of mortgges on multifmily nd commercil rel estte (see Survey of Current Business, September 1953, p. 18)."12 The ccurcy of estimtes bsed entirely on construction expenditures must be uestioned. nnul chnges in mortgge debt will be influenced only in prt by the vlue of construction expenditures; importnt lso re trnsctions in existing rel estte nd the rte of mortiztion on outstnding debt. For purposes of developing long-term nnul historicl series, nd in the bsence of better, more consistent dt, Goldsmith's techniue ws cceptble. For purposes of this study, however, which sought to develop urterly s well s nnul dt for reltively short period, with the possibility of mintining urterly series on current bsis, other methods, relying chiefly on the building up of totls from component debt series, were considered superior. These methods hd become fesible with the dvent of improved dt on mortgge debt. The resulting differences between previously published estimtes nd mine re much greter in erlier thn in lter postwr yers. In the totl residentil mortgge debt ctegory, differences re not very gret in ny 'er. rnging from high of less thn 6 per cent in 1945 to low of less thn 1 per cent in 1952, the lst yer for which Goldsmith-Grebler estimtes were vilble. Nerly the entire difference reflects differences in estimtes for multifmily mortgge debt. Differences in the one- to fourfmily mortgge debt series, bsed on the sme bsic source, re due to revisions in the dt. For the multifmily mortgge debt series, my estimtes re lower thn the Goldsmith nd Grebler estimtes in ech yer. by 22 per cent in 1945 nd 1946 nd rnging lower to 5 per cent in Conversely, the nonresidentil mortgge debt series in this pper is higher by from 22 to 4 per cent. The lower level of multifmily mortgge debt '2Greblcr, Blnk, nd Winnick, op. cit., ppendix L, p Their dt for postwr yers prior to 1949 were tken directly from Goldsmith. 10

6 shown here is bsed on dt from the 1950 Census of Housing, not vilble when the erlier estimtes were mde. Estimting techniues used in this study to derive nnul nd urterly estimtes of mortgge debt on nonfrm residentil, multifmily, nd nonresidentil properties re described in detil in column-by-column notes to the pertinent tbles. Since dt on one- to four-fmily mortgge debt hve long been t hnd, the problem ws to brek out seprtely debt secured by multifmily nd nonresidentil properties, vilble only s combined totl. This, then, would mke possible n estimte of totl residentil mortgge debt (one- to four-fmily plus multifmily mortgge debt). The problem ws pproched by estimting ech ctegory seprtely by type of holder nd combining these estimtes for totls, n pproch employed throughout the study. For figures on n nnul bsis the mjor problem ws estimtion of holdings of svings nd lon ssocitions nd of those in the brod ctegory of individuls nd others. (For holdings of other types of investors, dt for most yers were either reported or could he derived directly from estimted figures lredy in existence.) Estimtes of mortgge debt on nonresidentil properties held by svings nd lon ssocitions were derived from dt obtined by the Federl Reserve in registrtion sttements under Regultion X.'3 These estimtes together with those reglilrly vilble from the Federl Home Lon Bnk Bord permitted the derivtion of series on residentil nd multifmily mortgge debt (see Tble 16 for detils). series of nnul estimtes on mortgge holdings of individuls nd others secured by "multifmily nd commercil properties" hs been published for some time by the Deprtment of Commerce.14 The brekdown of this estimted series into two seprte series, shown in column 9 of Tbles 6 nd 7, ws bsed on benchmrk figure for multifmily mortgge debt provided in the 1950 Census of Housing.15 The 1950 reltionship between holdings by individuls nd others of multifmily mortgges nd of multifmily plus commercil property mortgges ws then used s the bsis for estimtes of the former series for other yers. ortgge debt on commercil properties held by this group ws obtined "Rel Estte Lons of Registrnts Under Regultion X," Federl Rexerve Rulkiin, June 1952, PP See the lst pges of section 3 for discussion of the relibility of this series. '5Unpublished estimtes of multifmily mortgge debt held by "individuls nd others" were prepred t the Federl Reserve by the uthor in collbortion with rs. Dorothy Projector, then with the Flow-of-Funds Unit. rs. Evelyn Hurley, lso of the Flow-of-Funds Unit, ws responsible for current estimtes of this series. In the preprtion of this pper, bsic estimting techniues were re-exmined, nd revisions were mde in the erlier series. 11.

7 s residul: nd residentil nsortgge debt ws ohtined by COnlhiniiig the series on one- to four-fmily nd on multifmily mortgge debt. The indeucy of this estimting techniue for providing seprte series of multifmily nd nonresidentil mortgge debt on the bsis of movements of nother estimted series of dubious relibility is obvious Other estimting techniues were discrded, however, fter expeninjcnt tion yielded no better bsis for the development of more relible series Generl weknesses of the series on one- to four-fmily, multifmily, nd nonresidentil mortgge holdings of individuls nd others re discussed more fully t the end of section 3, nd detiled estimting techniues re described in notes to Tble 5. Estimtes by Type of ortgge When the study ws undertken, existing published informtion on FHinsured, V-gurnteed, nd conventionl mortgge debt consisted of the following: for ll mortgge holders tken together, brekdown by FH, V, nd conventionl mortgges only within the one- to four-fmily property ctegory; for the min finncil institutions, brekdown only for totl nd not for types of residentil property; for svings nd lon ssocitions, nnul dt, nd for life insurnce conipnies, urterly dt on FH, V, nd conventicnl mortgges on totl nonfrrn but not on residentil properties. This bse is brodened by estimtes, here, of FH-insured presented multifmily mortgge debt (from previously unpublished estimtes of the FH) nd Conventionl debt (derived s multifmily mortgge direct residul by subtrcting debt from totl FH-insured multifmily multifmily mortgge debt).16 with previously These estimtes, together vilble dt, provide tics on residentil n integrted frmework of sttis- mortgge debt by type of property nd type of The most extensive mortgge. contribution mde by this study on estimtes by type of mortgge is the brekdown by holdings of The estimting techniues mjor types of lenders. vried for ech type of holder depending informtion vilble, nd on the relibility of resulting figures by reference to detiled my be judged notes to pertinent tbles. were bsed on reltionships Generlly, estimtes between lons held by lenders nd the totl Outstnding, between lons closed nd outstnding, chnges in Outstndings nd on the trend of between yers. For V-gurne lons, the min for erlier tsk ws one of estimting holdings postwr yers; dt for most cses. For more recent yers were vilble in Fl-I-insured lons the tsk for ll formidble. It reuired yers ws more estimting brekdown for mjor lenders between properties. mortgge debt is secured lmost entirely by one- to four-fmily 12

8 one- to four-fmily nd multifmily mortgge debt nd, for erlier yers, estimting totl FH-insured residentil mortgge debt s well ost often, nnul dt on the fce mount of FH-insured mortgges outstnding by type of lender, reported by the Federl Housing dministrtion, were used s bsis for distributing the net mount of holdings of totl FH-insurcd mortgges, vilble from other sources, between oneto four-fmily nd multifmily properties. Estimtes of conventionl mortgge debt by type of holder were derived s residuls by use of the estimtes of V nd FH mortgge debt outstnding. Estimtes by Type of ortgge Holder New estimtes by type of property nd type of mortgge, discussed in the two preceding sections, were used to build up the entire frmework of estimtes provided in this study through the process of estimting mortgge portfolios of ech mjor type of holder. Totls, with minor exceptions, were derived directly from these holder estimtes. s Tble shows (column 3P1), life insurnce compnies were the only mjor type of finncil institution for which nnul dt were reported in ll the property nd mortgge clssifictions desired. For other mjor types of finncil institutions, estimtes of nnul dt by type of mortgge for erlier postwr yers were reuired; for recent postwr yers, brekdown of FH nd conventionl mortgge holdings by type of property ws the min estimting reuirement. lrge portion of the urterly figures by both type of property nd mortgge, for ll mjor types of finncil institutions, ws provided by this study (see Tble ). With respect to estimtes of mortgge debt held by federl gencies, nd by holders included in the residul ctchll ctegory, individuls nd others, the pper brings together more detiled dt, both previously published nd unpublished, thn existed before in ny one plce. For federl gencies, nine seprte types of holders (listed on pge 000) hve been identified, including those no longer in existence, nd their holdings clssified by type of property. Included in the individul nd others ctegory, re seprte estimtes for totl mortgge portfolios of seven different types of miscellneous finncil institutions (see pge 000), mounting t the end of 1955 to one-sixth of the totl reported held by this entire miscellneous group. No relible informtion could be obtined on the holder distribution of the remining five-sixths of mortgge debt in this group. oreover, meger informtion on the mortgge portfolios of identified holders did not permit brekdown by type of mortgge debt, nd the vrying relibility of estimtes of their totl mortgge holdings my be judged from notes to Tble 2, columns 10 through

9 Estimtes for the two most importnt holders in the group -- mortgge compnies nd personl trust funds probbly represent the extremes of relibility. For mortgge compnies. estimtes re firmly bsed on blnce sheets of 860 compnies holding the bulk of ssets of ll mortgge compnies in the United Sttes, obtined in the course of specil study on the postwr rise of mortgge compnies.'1 For personl trust funds, estimtes cn be considered only s rough pproximtions bsed on informtion received from few lrge institutions dministering trusts, nd on other frgmentry sttistics.'8 Estimtes of totl mortgge holdings of other miscellneous types of finncil institutions, ll much smller thn those of mortgge compnies nd personl trusts, my be tken s firly relible. Published reports on which nnul estimtes re bsed include: for fire, csulty, nd mrine insurnce compnies, nnul finncil sttements; for frternl orders, credit unions, nd pension funds, n importnt segment of holdings vilble in reports of federl nd stte gencies; nd for investment compnies, the reports of the two mjor compnies which ccount for the bulk of mortgge holdings of this group, Qurterly estimtes in ll cses re bsed on liner interpoltion. Qurterly Esti,ntes Qurterly estimtes, published here for the first time for severl ctegories within ech of the three mjor clssifictions - type of property, type of mortgge, nd type of holder - re bsed on vriety of different sources set forth in the notes to ech tble. Where direct sources were lcking. estimtes were derived by interpolting between the endof-yer rtios of series nd the most closely relted ggregte - independently vilble or estimted - of which it is prt. These interpolted rtios were then pplied to urterly totls of the closely relted ggregtes. This techniue is prticulrly pproprite for interim estimtes of outstnding debt becuse reltion3hips between debt components do riot chnge much during the course of yer - seldom more thn 4 percentge points - nd the extent of urterly interpoltion is, therefore, smll. Chnges in mortgge debt during period re relted directly to outstndings t the beginning of the period, nd they represent only smll percentge of such beginning blnces. wide divergence in movements between relted series would hve to occur during yer, therefore, to cuse significnt devition in urterly reltionships from the trend sug- '1Sul B. Kimn. Postwr Rise of ortgge Compnies, Ntionl Bureu of Ecinomic Reserch. Occsionl Pper 60, in press. '8rhese est,mtes developed in Connection with other segments of the Ntionl Bureus Postwr Cpitl rket Study, will be more fully described in forthcoming publiction on urterly flows of funds through the cpitl mrkets. 14

10 gested by beginning nd end-of-yer rtios. The finl ccurcy of the interpolted urterly series, of course, depends lrgely on the extent to which the ggregte, of which it is prt, is independently reported or estimted. Usefulness of the New Estimtes The new dt nd estimting frmework developed here should be useful s bsis for more meningful nlysis of rel estte nd mortgge mrkets. They hve lredy proved bsic to the nlysis of the decde flow of mortgge funds in the study of postwr mortgge mrkets. The continution of detiled nd comprehensive estimtes of mortgge debt outstnding on regulr nd current bsis, so fr s possible, should permit better understnding of mrket events s they unfold. nlysis of mortgge mrkets, prllel to tht of construction mrkets, mde possible by dt in tht re, is now permitted by more detiled dt on the type of residentil property securing the ntion's mortgge debt nd by the seprtion of mortgge dt between residentil nd nonresidentil properties. Differences in the opertion nd growth of mrkets for individul dwellings, multifmily projects, nd business properties re illuminted by dt on the flow of mortgge funds into ech of these mrkets. Our understnding of the development of rel estte nd mortgge mrkets, of the vrying prticiption of finncil institutions within them, nd our insight into the different methods of lender opertion re ll dvnced by the vilbility of estimtes on types of mortgge flows - FH, V, conventionl - within these mrkets nd by type of mortgge lender. For exmple, of the shrp net increse of $80 billion in the flow of mortgge funds into mrkets for one- to four-fmily homes between 1945 nd 1956, svings nd lon ssocitions ccounted for well over one-third, while mutul svings bnks ccounted for less thn one-seventh. This widely divergent prticiption is explined lmost entirely by differences in prticiption in the conventionl mortgge mrket; svings nd lon ssocitions ccounted for over one-hlf of the totl net flow of conventionl one- to four-fmily mortgge funds, while svings bnks ccounted for only 3 per cent. The shrply incresing prticiption of mutul svings bnks in the mrket for home mortgges in recent yers, on the other hnd, is explined by their rpid rise to ledership s source of V-gurnteed mortgge funäs. In 1956 they ccounted for 36 per cent of the flow of such funds into home mortgges compred with 30 per cent for svings nd lon ssocitions. By wy of contrst to the vried prticiption of mutul svings bnks in mrkets for conventionl nd federlly underwritten home mortgges, they re by fr the lrgest IS

11 supplier of funds for both conventionl nd federlly underwritten multifmily residentil mortgges, ccounting for bout two-fifths of the net flow of funds into both types of mortgges in the postwr decde. This is explined prtly by the concentrtion of svings bnks in estern cities where most multifmily Construction hs occurred, nd prtly by the fct tht svings nd lon ssocitions, the lrgest conventionl mortgge lenders, prticipte only in smll wy, by trdition nd by lw, in multifmily mortgge mrkets. foundtion for these mrket observtions, nd for others generlly ssumed but not verified, is provided by the new dt on type of mortgge within property clssifictions by type of lender. The wy is clered, lso, for new nlyses of nd insights into mrket behvior not previously possible. The usefulness of the dt generlly is enhnced by their vilbility on urterly bsis, which in the course of time should permit the seprtion of sesonl fluctutions, nd hence the detection of significnt short.-terni movements. Vists re opened to future study in the reltionship of net mortgge flows to short-term chnges in institutionl nd cpitl mrket developments, nd in federl mortgge, fiscl, nd monetry progrms nd policies. These judgments seem vlid notwithstnding importnt shortcomings in the estimtes nd in bsic prts of the entire frmework of dt on outstnding mortgge debt which re considered in the following section. 3. DESCRIPTION ND PPRISL OF DT ON OUTSTNDING ORTGGE DEBT Including the new estimtes, more detiled nd comprehensive sttistics re vilble on mortgge debt outstnding thn on other res of mortgge finnce. liven so, mny serious gps nd shortcomings in the dt, chiefly concerning mortgge portfolios of holders other thn the four min types of finncil institutions nd of Federl gencies, remin nd re pointed out in this section. 'The severl series which mke up the body of mortgge debt sttistics re bsed on wide vriety or sources nd re of vrying degrees of ulity. ost of the bsic dt originte in finnii reports of mortgge lenders to supervisory uthorities or trde ssocitions, or in other reports to federl gencies. Until erly 1953, the severl types of widely scttered dt on mortgge debt were brought together into comprehensive nnul time series in only one regulrly published Secondry source, the Survey of Current Business of the Deprtment of Commerce Since then, nnul dt, in limited clssifictions, hve been published by this gency ech