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More Homeowners Mortgage Free than Underwater


Since the recession, the housing narrative has been about homes underwater, foreclosures and falling home prices. However, a new report reveals that there are more homeowners who are mortgage free than homeowners underwater.

Since the recession, the housing narrative has been about homes underwater, foreclosures and falling home prices. Even with reports that the housing market is turning around, there are just as many reports that some housing markets are still doing poorly.

However, a new report from Zillow revealed that there’s actually more good news in the housing market than bad. There are more homeowners with no mortgage debt at all than there are homeowners struggling to manage their mortgage debt.

The national average for free and clear homeownership is 29%.

Roughly 30% of Americans own their homes outright, according to a Zillow analysis. That’s 21 million Americans who are free and clear of mortgage debt. Meanwhile, 14 million homeowners are underwater.

In areas with proportionally lower overall home values, the rates for homeowners without mortgage debt are going to be higher, which makes sense since smaller loans are easier to pay back, Zillow reports. So states in the south — Mississippi, Louisiana and Alabama — have a higher rate of free and clear homeowners, while states on either coast — New York, New Jersey, California — have the lowest rates.

“Geographically, the percentage of free and clear homeownership is to a large extent driven by the median home values in different areas across the nation,” according to the Zillow report. “In particular, at the county level we find the free and clear homeownership rate is negatively correlated with the median home values in these counties.”

The two demographics that most influence free and clear homeownership are age and credit rating of primary mortgages. The older the homeowner and the higher the credit rating, then the higher the likelihood is that the homeowner won’t have any mortgage debt.

Of those who own their homes outright, 44% have a credit rating between 800 and 900. Homeowners between the ages of 65 and 74 are most likely to own their house outright (20.5%).

“Homeowners unencumbered by a mortgage may be more flexible than indebted homeowners, and therefore more apt or willing to list their homes or enter the market for a new property,” Zillow Chief Economist Stan Humphries, PhD, said in a blog post. “By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas, as well.”

Read more:

Up-and-Coming Neighborhoods in 2013

10 Housing Markets with Huge Expected Growth in 2013

Healthiest Places to Live

Free and Clear American Homeowners

- Zillow

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