One-Third of U.S. Homes Owned Outright

By Stevie Duffin Updated on 11/4/2013

While the mortgage market collapse and burst of the housing bubble created a high degree of anxiety about the number of underwater homeowners, statistics have recently shown that approximately one third of homeowners in America own their properties outright, with no mortgage balance remaining. According to a study from TransAmerica, the real estate website Zillow discovered that 20.6 million Americans own their properties with no mortgages, totaling 29.3% of all homeowners.

A portion of these homeowners funded their home purchases with mortgage loans that were repaid gradually over time while others purchased their homes with cash out of pocket. As one would expect, higher rates of homeownership were shown in older age brackets, in areas with less expensive properties, and with homeowners who had higher credit scores. Statistics were taken from a study spanning 800 metropolitan areas, 2,100 counties, and 21,900 ZIP codes across the U.S.

However, this rate of outright homeownership was not evenly disbursed. For instance, states with the highest rates of non-mortgaged homeownership included West Virginia (45%), Louisiana (39%), and Arkansas (38%). Nevada showed the lowest rate at 20%, followed by the District of Colombia and California, which respectively measured 20% and 22%.

In the 30 greatest metro areas, the highest rate was in Pittsburgh at 38.6% and Tampa at 33. 2%. New York, Cleveland, and Miami followed these two cities and were closely arranged, all within a point of the national average. In contrast, the lowest rate of non-mortgaged homeownership within metro areas included Washington, DC, which averaged lower than the District of Columbia average at 15.5%, and Atlanta at 17.7%. Likewise, Las Vegas, Denver, and Charlotte averaged in the range below 20%.

The results of the study demonstrated that geographic differences largely reflected the differences in home values of the regions, especially supported by statistics by county which indicated a negative correlation between non-mortgaged homeownership and median home values. A total of 53% of homes purchased by low credit homeowners that are currently non-mortgaged had home values of $100k or less, and 85% of these homes were sold for $200k or less.

Unsurprisingly, 20.5% of homeowners within the 54 to 74 age range had the highest rate of outright homeownership at 20.5%, followed next by those in the 74 to 84 age range at 17.9%. However, the study also revealed that, of homeowners between the ages of 20 and 24, 34.5% were mortgage free. To explain this phenomenon, authors rationalized that homes owned by the youngest age brackets were likely funded in cash purchases by parents or guardians or that their owners were young millionaires. A similar phenomenon was noticed between the ages of 25 and 49, correlating an increase in total homeownership with an increase in age.

Of the homeowners with non-mortgaged properties, roughly 44% have excellent credit, with FICO scores between 800 and 900. However, only 15.5% of homeowners in the highest credit tier, between 900 and 990, owned their properties outright, potentially explainable by the fact that these homeowners choose not to pay off the mortgages but rather disburse their savings to defend themselves against the possible depreciation of their homes. Twenty-nine percent of low credit homeowners (501-600) own their properties mortgage-free.

According to Zillow Chief Economist Dr. Stan Humphries, the study uses unique data to determine how much homeowners owe on their mortgages to identify underwater and delinquent homeowners; however, looking at the opposite, the percentage of homeowners that own their properties outright, can be important and valuable as well. Mortgage-free homeowners are important to the real estate market, as they tend to be more flexible than those encumbered by mortgage debt. Furthermore, by determining the regional statistics and data and how outright homeownership is affected, analysts can have access to some potential inventory and a possible future housing demand in those locations.