• Kevin Murphy

USA: Mortgage Free Homeownership Analysis

A new report published by Zillow this week shows that almost 37% of American homeowners are living mortgage-free.The increase began after the Great Recession with over 5.5% of homeowners paying off their mortgage obligations within the past ten years.

Javier Vivas, director of economic research at Realtor.com tells Bloomberg:

“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,”

Zillow credits an ageing population and changes in owner demographics as the principle reasons for the latest data. For younger buyers the costs of deposits for mortgages are leading to longer waiting periods before making a home purchase. Older Americans are more likely to pay off their home mortgages due to accumulated wealth and more time to pay off their home mortgages.

Data in 2017 shows that states with lower housing prices have the highest rates of 'free and clear' ownership with the American state of West Virginia with the highest rate at 54% of homes mortgage free. The least amount of mortgage free home markets can be found in the state of Maryland with 27% of free and clear ownership and the nations capital Washington D.C. at 24%.

The median prices of homes over the past ten years have increased 60% or the equivalent of $100,000 USD in additional equity for homes that are mortgage free.

Zillow with data research by the American Housing Survey (AHS) suggests that the rate mortgage free ownership is higher than 37% and is at 40% after a sampling of 115,000 housing units.

The report states:

'Trade-offs associated with paying off a mortgage include abrupt changes to the value of the home and the opportunity cost of other higher investment returns when mortgage rates are low.'

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