Mortgage Analysis, Pt. 3

Part
01
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Part
01

Mortgage Aggregators: TAM

With the recent drops in interest rates leading to a 79% increase in mortgage refinancing applications last week alone, mortgage aggregator sites are likely to see an increase in business. Even before the interest rate change, there was a 15% increase in new mortgage applications over 2019, and given mortgage debt totals over $15 trillion there is a market for Americans to modify their mortgage. We estimate the TAM for this section of fintech to cover 64 million individuals and almost $1.391 billion dollars based on the calculations made below.

Total Addressable Market: Determining the Potential Population

  • The average value of a new mortgage was $260,348 in 2018 and the total amount of mortgage debt in the US is almost $15.5 trillion.
  • In 2018, 64.4% of Americans owned a home, and of those homeowners 63% had a mortgage. This leads to a possible number of consumers for mortgage information at approximately 132 million individuals (US population of 328 million, with 64.4% of that being 209.98 million, and then 63% of the 209.98 being 131.84).

Total Addressable Market: Conservative Estimates

  • The current market met by mortgage aggregators potentially covers 68 million unique people a month (based on summing the unique visitors to each site per month, 22+11+10+10+6+4.4+2.5+2.1 million people per company found).
  • This leaves a gap of approximately 64 million people who could be addressed to look for mortgage information, based upon the population of Americans who own mortgages minus those who are currently using these sites (132 million minus 68 million is 64 million).
  • The maximum market currently addressed, based upon the valuations for all products at these companies, is $1.392 billion (based on summing the amount annually for revenue or funding per site, so $234M+$1.1B+$51M+$7M).
  • Assuming the remaining 64 million mortgage owners begin using mortgage aggregator sites, the market could nearly double for products to approximately $2.7 billion by adding on an additional $1.391 billion (potential new users are approximately 95% of the current market, so we multiplied the current market value by 95% and added it to the existing market to get $1.392 billion plus $1.391 billion).

Total Addressable Market: Relaxing Assumptions

  • Adding in the expected growth in mortgage applications using the 15% increase in mortgage applications in 2019 would lead to changing the size of mortgage holders in the US to approximately 152 million people (132 million mortgage holders plus 15% of 132 is 151.8 million). This could lead to a potential addressable consumer base of 84 million more people (152 potential mortgage holders minus the existing 68 million mortgage aggregator site users).
  • As well, the likelihood that the individuals currently using mortgage aggregator sites are unique across sites is a very strong assumption, so the number is likely higher for the addressable market.
  • Another assumption to relax is that the total amount a mortgage aggregator company makes goes entirely to the mortgage aggregation product; most of these sites offer other products such as credit card aggregators and even loans themselves.

Research Strategy

We first tried to determine the size of the potential consumers for mortgage aggregators, based on how many people in the United States hold mortgages. While we could not find the raw number of mortgage holders in the US, we could find the percentages and used population estimates from the US to calculate out the raw number of potential consumers. To look into the mortgage aggregator market, we did a broad search to the mortgage aggregator market to see if there was any information on the size of these products. There was not, so we began searching for individual companies and their total consumers as well as total revenue or funding. We found information on likely mortgage aggregator sites on Craft.co, and the funding information in Crunchbase where available or through press releases from the companies themselves. Most of these companies offer other consumer products in their portfolio and do not break out the mortgage-specific line of business; we reported on their total funding as a result of this since we cannot determine the specific mortgage aggregator pieces. From these sources, we were able to look into the following companies and pull back their consumer base and funding: Nerd Wallet ($500 million revenue, 22 million unique visitors a month), Bankrate ($234 million revenue, 11 million unique visitors a month), LendingTree ($1.1 billion revenue, 10 million unique visitors a month), SmartAsset ($51 million funding, 10 million unique visitors a month), Comparisons.org (No funding or revenue information available though they can spend $15 million on marketing, 6 million unique visitors a month), Wallet Hub (No funding or revenue information available, 4.4 million unique visitors a month), Money Under 30 (acquired for $7 million, 2.6 million unique visitors a month), and Lower My Bills (acquired for an undisclosed amount, 2.1 million unique visitors a month).
Sources
Sources

Quotes
  • "Refinance applications rose a whopping 79% for the week and were 479% higher than a year ago. That was the highest level of refinancing since April 2009. Falling mortgage rates over the past several weeks generated an unexpected refinance boom, but last week, when rates fell even more sharply due to deep market concerns over the coronavirus, the news clearly resonated with borrowers. The refinance share rose to 76.5% of total applications from 66.2% the previous week. "