Owning a Home, Mortgage Free

With all the painful foreclosures during the recent economic downturn, it’s easy to forget that some homeowners don’t even have mortgages. Nearly a third of homeowners — 29.3 percent of them — do not, according to a recent analysis by the real estate site Zillow.

That translates into nearly 21 million Americans who own their homes free and clear, Zillow found. By comparison, about 14 million homeowners are underwater — that is, they owe more than their homes are worth.

Stan Humphries, chief economist at Zillow, said that looking at the number of debt-free homes is important, given that the inventory of homes for sale is tight in some markets. Homeowners without mortgages may have more flexibility, and therefore be more willing to put their homes up for sale.

The number of homeowners with mortgages, though, is still high. Roughly 71 percent do, according to Zillow’s analysis. That compares with about 45 percent in 1945, and 62 percent in 1990, based on federal census data, Mr. Humphries said.

Not surprisingly, most debt-free homeowners tend to be older, since they have had longer to pay off their loans. Homeowners 65 to 74 years old are most likely to have no mortgage (21 percent), followed by 74- to 84-year-olds (18 percent).

But when looking at the various age groups, Zillow found that almost 35 percent of homeowners age 20 to 24 owned homes free and clear. Owners in that age group make up a small proportion of homeowners over all. They may have had wealthy parents who buy homes for them, or they may be young, successful entrepreneurs, the Zillow analysis notes.

Areas with higher concentrations of mortgage-free homes tend to be those where home prices are more affordable, since smaller loan amounts are easier to pay back more quickly.

Among the country’s largest 30 metropolitan areas examined in the study, Pittsburgh and Tampa, Fla., had the highest rates of debt-free owners, at 39 percent for Pittsburgh and 33 percent for Tampa.

The New York area also ranked high on outright ownership, at about 30 percent. That is because the area included in the analysis encompassed northern New Jersey, parts of upstate New York and Long Island, according to Zillow. Because of the wide area, the median home value is lower than might be expected. The median home value for the entire New York metro area is $343,100, compared with $940,800 for Manhattan alone.

Washington, D.C., at about 16 percent, and Atlanta and Las Vegas, each at 18 percent, had the lowest percentages of homeowners without mortgages.

Zillow’s analysis looked at mortgage data from TransUnion through the third quarter of 2012. The data covered roughly 800 metropolitan areas nationwide. The analysis excluded investor-owned and rental homes.

Do you own your home outright? How did you pay off your mortgage?