Nearly 40% of U.S. homes are mortgage-free, census shows | Hacker News Reader

Nearly 40% of U.S. homes are mortgage-free, census shows

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48 pointselsewhen70 comments

And how many percent of US homeowners are mortgage-free?

Should be around 40%. The headline graph in the article has its data source as "Among owner-occupied housing units; Annually, 2012-2022". There shouldn't be much difference between percent of owner-occupied homes that are mortgage free and percent of homeowners who are mortgage-free.

Wealthy people tend to have second homes, which are also considered "owner-occupied".

I suspect this comment will be severely underrated, but it conveys such a deep insight into the right way to think about this. This is the variable we really care about!

~67% of homes are owner occupied.

It's unlikely ~100% of the investor owned homes are free and clear and only ~3% of owner occupied homes are owned free and clear.

For one, the tax code HEAVILY incentivizes investors to own property on leverage. For two, the only reason property is/was a good investment was because of artificially low interest rates for most of the last ~25 years (an entire generation of investors). When you combine that with a leveraged bet that cannot be margin called, you will make a FORTUNE (and many did).

Leverage was the way.

I'm willing to bet the majority of free and clear owned homes are owner occupied (simply because 2/3rds of homes are owner occupied).

> the tax code HEAVILY incentivizes investors to own property on leverage

Can you expand on this claim?

Mortgage interest deduction is often talked about but realize that unless you itemize deductions you can't do it, and itemizing has been made very difficult so most people won't qualify[1].

There are many good reasons own your home, but tax code benefits is not one of them.

[1] https://taxfoundation.org/blog/standard-deduction-itemized-d...

> he tax code HEAVILY incentivizes investors to own property on leverage

How? any resources I can find on this topic?

I think this is referring to --

1. The mortgage interest deduction (reduced under Trump, of all presidents).

2. 1031 Exchange elections, which let you avoid capital gains.

> The mortgage interest deduction (reduced under Trump, of all presidents).

The way I understand it, reducing the mortgage interest deduction disproportionately affected homeowners with higher mortgages in high cost of living areas, just like reducing the SALT deduction affected people in higher income tax/cost of living areas. Both of these were likely supported by President Trump to punish "blue staters" in these areas.

It's an older story (from May) but it looks like only about 23% of US homeowners are mortgage-free. Although they were also including renters in this analysis. (https://www.forbes.com/sites/johnwake/2023/03/31/us-has-3rd-...)

I couldn't find anything that specifically looked only at homeowners, rather than at homes themselves.

this is an interesting distinction but I don't know enough to totally wrap my head around it. Can you expand a bit on how a home would have no mortgage but that same homeowner would?

One person owning multiple homes..

Or a company owning hundreds of homes.

I have a few friends who had major liquidity events happen to them and they each own 3-5 homes as investment homes. I believe these properties were paid full in full and in cash, so no mortgage.

This small proportion of my friends is mortgage free, but they own multiple houses so a fairly large proportion of my friends houses are mortgage free.

Blackrock and other funds buy thousands of homes and rent them out. Those are mortgage free homes.

You're probably thinking of Blackstone which spunoff from Blackrock in the 1980s.

Further reading:

https://www.blackrock.com/us/individual/insights/buying-hous...

https://www.blackstone.com/housing/our-track-record-in-housi...

https://www.helpadvisor.com/retirement/blackrock-vs-the-blac...

https://fintel.io/news/blackrock-now-owns-490-of-blackstone-...

If it’s such an infinitesimally small portion then why defend the position instead of just shedding the assets? I don’t trust their whitewashing at all.

Blackfund should sell but they won’t until they’ve extracted the blood they think they deserve.

A distinction without a difference - they're both in the same rent-seeking model.

I guess, except Blackrock literally does not buy houses whereas Blackstone owns "0.03% of single-family homes in the US" and rents them out.

A distinction that seems entirely relevant to the claim "Blackrock [...] buy thousands of homes and rent them out."

This article claims otherwise [1]

"BlackRock, Vanguard, and State Street have notably been making substantial investments in single-family homes across America. Their housing acquisitions are primarily conducted through real estate investment trusts (REITs), including home-rental companies. BlackRock, for example, is heavily invested in Invitation Homes. A company that owns and operates over 80,000 rental homes in the U.S. "

[1] https://businessandfinances.com/2023/09/investment-giants-bu...

Why would they pay cash instead of getting big loans for multiple properties at a favorable rate?

You can still finance the properties with debt, without it being a mortgage.

For example, taking out a single large loan, then using that to purchase many properties with "cash".

A home owner might own multiple homes

> "If you stick with it, you'll get a low rate," he tells Axios.

I love this kind of advice. It's so typical from someone who thinks they're self-made with no appreciation for their circumstances

I think you misunderstand the comment, it is a reference to how mortgages work in the US (I know not in most other countries).

You can keep ratcheting your interest rate down over the years, but it will never go up. When interest rates rise, you sit tight. When they drop, you keep refinancing.

Interesting introduction for a missing article. And that graph… maybe the funniest part is when they chose to only represent a single decade and then note that one of those ten years doesn’t even have data.

Not really. A ten year trend is decently long and the one missing year in a monotonically increasing trend is unlikely to affect your understanding

IIUC, it's because the data only goes back to 2010.

https://data.census.gov/table?q=Owner-occupied%20units%20wit...

Is the value according to the survey participant?

They are census questions, which the census responder fills out:

https://www.census.gov/acs/www/about/why-we-ask-each-questio....

(There's a blue-green box midway down the page that you can expand to see the actual questions.)

I see, thanks! It seems like the valuation would suffer from the same problem as "owner imputed rent" component of BLS consumer price index surveys. People who haven't been in the housing market for 30+ years have no idea what the house is worth.

Interesting, given all of the articles about increasing consumer debt. I'd guess that a lot more people are motivated to do this, with mortgage rates fluctuating upward so quickly over the last couple of years.

As this other comment pointed out [0] 40% of homes are mortgage free, but that says nothing about home owners.

Anecdotally I know that none of my neighbors are mortgage free. However I also have a few friends that had major cash windfalls things like startup exits or time working in hedge funds, each of them owns 3-5 houses outright as investments.

So, with this small sample I can easily see that of the total number of homes owned by friends/neighbors, 40% being mortgage free sounds about right, but far less of my friends/neighbors are mortgage free.

0. https://news.ycombinator.com/item?id=38612670

I agree overall, but the census should be measuring the primary residence of the respondent and exclude second houses or renters. Basically it's measuring households and not houses.

In fact the opposite is true. My mortgage is 2.125% and I have no motivation to pay that off because of rates spiking upward which gives me a better cash return than 2.125%.

If I could, I would pay off my 7.075% mortgage this minute. That's equivalent to a 7.075% guaranteed risk-free return, which I will not get on any other investment.

I think there's some of both. Plenty of people with low interest rates have little motivation for payoff.

But if you are moving right now for any reason, you aren't likely to be taking on more debt in the process. There's a pretty strong incentive to do what it takes to get debt to or near zero.

Or it just could be more polarization between the haves and have nots in the economy. Fewer in the younger generations can afford housing than previous generations could at that age, so the pool of US homeowners is going to skew to the older, more financially established boomer generation who bought homes decades ago for much cheaper.

This is my belief as well.

In California, the haves will have houses. The have nots will have ADUs.

Our world is structuring itself to (more) obviously reveal the wealth disparity.

Is there some sort of metric/data/graph for housing concentration? I'd imagine older people might have several properties if many of them bought a main residence, a summer home, etc, 30+ years ago when they were somewhat cheap.

There’s a clear correlation between age and homeownership. The data is relatively stable over time though.

https://www.census.gov/housing/hvs/data/charts/fig07.pdf

In other news, older people are older. The median age in the US is 38.8 and for homeowners you can even throw out basically anyone under 20 (teens commonly don't own homes [citation needed]), so the median homeowner might be like 50. So it is not clear at all that this statistic says anything other than "40% of home owners are over the age of 60" (or the homes are owned by corporations, which makes this a quite useless statistic).

Translation: Nearly 40% of US homes are mortgage-free (and owned by Boomers)

Translation: ~30% of homes have been owned for more than 20 years, and guess what happens at the end of a mortgage and after 20 years of inflation? And guess how much money the top 10% have? Close to $2m counting their house...

You'll be old one day, too - believe it or not.

The boomers aren't special. They're just old.

One day they'll be dead, and you'll be the old person everyone complains about who owns their house and bought if for next to nothing 30 years ago.

The boomers bought these houses for much less (proportional to their income) than people buying today. By quite a large margin. So yes, they’re special in that sense. People today won’t be nearly as well off in 30 years as the boomers were in a comparable timeframe. If current trajectory continues the kids in 30 years will be rioting, not complaining.

~87% of purchases are financed. Back then it was probably higher. Interest rates were >13% when my boomer next-door neighbor bought her house 30+ years ago. Payments weren't much different in tax-adjusted terms than then just a few years ago.

~87% of people are buying a mortgage payment - not the sticker price on the home.

Mortgage payments are VERY high right now with respect to interest rates. Not long ago, at the beginning of the pandemic - they were quite low.

Either prices will come down - or much more likely - interest rates will go back down or - less likely - incomes will go up (or a combination of the 3).

Kids 30 years from now will be complaining. Song as old as time.

> One day they'll be dead, and you'll be the old person everyone complains about who owns their house and bought if for next to nothing 30 years ago.

How are these mythical "young but future homeowners" going to get a house? They're not buying them at today's prices and interest rates. And their Boomer parents are drawing down the equity via reverse mortgages to fund their retirements, so there won't even be equity to inherit when they kick the bucket.

My bet is when the Boomers are dead, the only ones left owning homes will be banks and private equity firms, and we'll all be renting from them.

> They're not buying them at today's prices and interest rates.

Those boomers may have been buying houses in the late 70s when mortgage interest rates were over 10%, so today's rates would be a bargain.

Or for more recent numbers, in the late 90s rates were over 8 (my first mortgage was 8.5%)

The point being, current rates seem high only compared to the incredibly low rates of the past decade but they are not particularly high when seen over a longer time window.

More evidence that there are a lot of baby boomers.

I'm between gen x and millennial and own my home outright. The plural of anecdote is not data, but this isn't something that most people discuss with each other.

I don’t know if this is true evidence but you have to wonder what the market will look like once Boomers need to vacate their homes, only to see a market where old millennials who don’t have much working life left decide never to buy their first home.

In other news, nearly 40% of homes are owned by corporations.

On alternate days we discuss the fact that REITs buy homes for cash.

In the article they specify "owner occupied."

How many were houses bought with a scant PPP loan that never has to be paid back

There's a pretty consistent slope in the plot since 2012, and the steepest point was in 2012-2013, so it's probably negligible relative to other factors.

HEY! They earned that!

Now shut up and pay back your $130k worth of predatory and usurious student loans, freeloader.

Well sure. The homes my landlord rents are mortgage free. I can say the same for folks I know with 2nd vacation homes and airbnb rentals.

For the rest of my anecdata: For folks I know living in their own households, about 20% have it paid off. About half of those folks own multiple homes.

This specifies owner-occupied.

Appreciate the clarification. I was on my way out and didn't read thru.

> For folks I know living in their own households, about 20% have it paid off.

Sure - if you're 25 and most of your friends are aged 20-35, probably <40% even own a home. And those that do are probably <10 years into paying it off.

Hell, a few years ago when interest rates were zero I heard a lot of people saying it was a bad idea to pay off your mortgage early, and far more sensible to invest the money instead. So even if the people your age got a big cash windfall, they might not have paid off their mortgage.

On the other hand, if you know a bunch of 65-year-olds who've had maybe 40 years to pay off their mortgage, and 40 years of inflation on their side shrinking the principal? It's probably a different story.

A landlord who doesn't use leverage is in the wrong asset class. Even if they'd somehow paid off the property before, anyone who didn't pull out cash when rates were below 5% and invest it elsewhere is a fool.

This explains why they own many mortgage free houses and you do not.

Trivially, yes: I invest with borrowed funds, while the hypothetical free-and-clear landlords in the previous example have paid back their loans.

I have a crazy theory: Zillow is directly responsible for the housing shortage and high home prices. Zillow inspires people to move. More moving means houses get fixed up which increases home values. Browsing through homes on Zillow might start out as something to do when your bored but that can easily lead to "what if" thinking. Before Zillow they wouldn't even be thinking about moving.

The US has not built enough homes to meet demand for over 30 years which is by far the biggest factor in high housing prices. Zillow is not causing people to move more, the number of Americans moving each year is reaching record lows. High housing prices mixed with high interest rates is causing people to stay put because the cost of buying another home is much more costly. You have to go from your old low-interest mortgage to a high-interest one and high housing prices means realtor fees are also sky-high.

Agree that Zillow and similar make it much easier and top of mind. Home flipper shows on HGTV are also part of the equation since it looks very simple and like guaranteed profit.

"You put $40,000 into your kitchen and bathroom remodel, so that will increase the value $100,000".

There's definitely value for opportunity cost, but oh boy do some of those shows exaggerate it to the point of absurdity. Especially when it's a builder-grade remodel.

I'm not sure anyone is doing that when they're bored without some level of genuine interest.

Interesting idea, I would argue the opposite on the basis that easier, more frequent transactions in a market improves price discovery and keeps the housing price closer to the "true" price based on supply and demand.

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