Bloomberg: Nearly 40% of U.S. Households are Free of Forward Mortgages

More Americans today find themselves living in homes that are free and clear of forward mortgage payments when compared with years past, according to U.S. Census data analyzed by Zillow (via Bloomberg). That data indicates that nearly 37 percent of American households own their homes without any remaining mortgage payment obligations.

This number found itself rising slightly in the aftermath of the Great Recession, and the overall share of homeowners paying off their mortgages has risen 5.5 percentage points over the past decade. Higher amounts of available home equity and the rise in free-and-clear homes is a reflection of a generally prosperous economic climate, according to Realtor.com Director of Economic Research Javier Vivas.

“In general, higher home equity is financially preferable and the rise in mortgage-free ownership is in line with brighter economic conditions, which is why we’ve seen the free-and-clear share increase over the last decade,” Vivas says in the Bloomberg article.

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Other attributable reasons for this rise can be laid at the increasing rate of aging members of the population along with shifting demographics associated with homeownership, according to Zillow.

“Younger Americans are likely to wait longer to buy a home due in part to rising living costs and student debt,” Bloomberg’s Shelly Hagan writes. “As a result, older Americans comprise a larger share of total home ownership and have had years to pay off a home as well as build wealth. This trend could reverse as younger generations age and enter the real estate market.”

The ways that homeowners interact with mortgages varies by state. Territories featuring lower prices for housing typically correlate to having higher rates of mortgages that have been fully paid off. According to data from 2017, West Virginia had the highest share of mortgage-less homeownership at a rate of 54 percent, while Maryland and the District of Columbia brought up the rear with rates of 27 percent and 24 percent, respectively.

The source of the data analyzed by Zillow comes from the annual American Community Survey (ACS), which includes approximately 3.5 million respondents. Some of the data was also sourced from the U.S. Census Bureau’s American Housing Survey (AHS),which Bloomberg notes suggests the rate of free and clear homes is higher than figures recorded in the American Community Survey at 40 percent of households. The AHS has a much smaller sample size of 115,000 respondents, however.

Read the full article at Bloomberg.

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