Americans are tired of worrying about interest rates. That could help explain why over 40% of American homeowners are mortgage-free—the highest figure on record, according to ResiClub’s analysis of census data, as reported in the New York Post.
However, it’s not a strategic investment strategy. Rather, it’s because Americans are getting older and have gradually paid down their 30-year loans.
Despite that, the growing number of paid-off homes could have far-reaching ramifications for the housing industry, including real estate investors.
Mortgage-Free America: The New Reality
As the baby boomer generation nears retirement, many have paid off their primary mortgages or sold larger homes and bought smaller ones for cash. ResiClub notes that 54% of mortgage-free homeowners are aged 65 and older.
The greatest concentration of mortgage-free homes is in the South and Midwest, where median ages are higher. In Texas, 61.8% of McAllen, 57.8% of Brownsville, and 57.1% of Beaumont residents have paid their last home loan installment.
The opposite is true in fast-growing cities with younger demographics, which have the smallest number of free-and-clear residents, such as:
- Washington D.C.: 26.4%
- Provo, Utah: 27%
- Denver, Colorado: 27.1%
- Greeley, Colorado: 27.2%
- Ogden, Utah: 28.8%
Why This Trend Matters for Real Estate Investors
The downside
Communities with large numbers of paid-off properties and homeowners happy to stay in place translates to less overall mobility, fewer motivated sellers, and less property churn. In short, it’s a bad place to buy deals, for both flippers and landlords.
According to Redfin