Why More Americans Are Living Mortgage-Free: A Surprising Trend!

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Did you know that a significant slice of American homeowners are living the dream—completely mortgage-free? That’s right! According to the U.S. Census Bureau, nearly 40% of homes across the nation were owned outright as of last year. That’s a whopping more than 34 million households where the American dream has been fully realized!

Interestingly, the Baby Boomer generation, folks aged 60 and above, makes up a substantial two-thirds of these liberated homeowners. But here’s the kicker—almost 12% of mortgage-free homeowners are in the vibrant age group of 45 to 55, too!

Where are these mortgage-free havens, you ask? The National Association of Home Builders (NAHB) has pinpointed the top five congressional districts for mortgage-free ownership, and they’re primarily nestled in the sunny, friendly Southern states like Texas, West Virginia, Kentucky, and Mississippi. Lower housing costs and delightful weather are magnets for older residents seeking a peaceful retreat.

On the flip side, you’ll find fewer mortgage-free homeowners in bustling areas characterized by younger populations and urban challenges—think California, Maryland, Virginia, and Washington, DC, where affordability can feel like a distant dream.

And here’s something fascinating: cash buyers are shaking up the landscape of mortgage-free living!

According to the National Association of Realtors, a groundbreaking 26% of homebuyers are opting to pay cash for their new digs. Gary Mintz, a savvy realtor with Berkshire Hathaway HomeServices Fox & Roach, has recently observed a surge in cash transactions, particularly in his Philadelphia market.

“Most of my buyers—about 65-70%—are hailing from out of town, especially New York City,” Mintz shares. “Since they’re paying cash and skipping the mortgage, they’re the true owners of their homes.”

These cash buyers are often sitting on substantial savings or trust funds, which Mintz finds astonishing, especially in a price bracket exceeding $500,000. “How they manage that is beyond me,” he admits. “They typically have at least $500,000 in cash, and many possess even more!”

But it’s not just city slickers making a splash; in vacation-centric communities, cash purchases are a norm. Glenn Phillips, CEO and lead economic analyst at Lake Homes Realty, reports that over half of their buyers each year opt for cash, influencing the market’s overall mortgage-free rate.

Phillips emphasizes that these aren’t desperation purchases. “These are discretionary home buyers seeking second homes on the water—lifestyle choices for those over 45 with significant incomes.”

“There’s more cash out there for real estate transactions than many realize,” Phillips notes, highlighting how headlines often focus on rising mortgage rates that challenge first-time buyers and growing families, while overlooking the wealth of older couples and individuals with a lifetime of asset growth.

However, not every affluent buyer is rushing to pay cash. In environments with lower interest rates, many still choose to take out loans.

During the pandemic, with interest rates hitting historic lows, Phillips noticed an intriguing trend: lake home buyers, despite having the means to buy outright, opted for mortgages as a savvy hedge against inflation. “If your mortgage is at 3% while inflation is at 4% or 5%, you’re essentially making a smart investment,” he explains. This keeps their cash free for other lucrative opportunities.

Buyers might think cash offers hold more weight, but Phillips points out that for sellers, it’s all about risk. “A cash offer means less risk compared to one with a mortgage approval contingency, which could derail the deal.”

So, what does the future hold for mortgage-free living?

According to Phillips, it’s a mixed bag influenced by market dynamics. “The number of homeowners living mortgage-free will always ebb and flow, driven by various factors beyond mere interest rates,” he explains.

These factors can include home prices, inventory levels affecting supply and demand, and stock market fluctuations impacting cash buyer confidence. Phillips predicts that the percentage of mortgage-free homeowners will fluctuate between 18% and 35%, with shifts as much as 5% in a single month—depending on the data source.

Editor Kimberley Haas contributed to this report.