Monday, January 5, 2009

Home Ownership without Mortgages

One thing we read over and over is that 30% of homes do not have mortgages. Lets take a look at this statistic -

From MSNBC -

The good news is about 30 percent of homeowners have no mortgage at all.

From Marketwatch -

Among the 75.6 million homes in the country that were owner-occupied, 24.9 million units were owned free and clear in 2007. That means about one in three homes had no mortgage at all.

(Actually it means that one in three owner-occupied homes had no mortgage.)

And finally a well worded one from Bloomberg -

There were 111.7 million occupied housing units in the U.S. in the third quarter, 68 percent used by owners and the remainder leased by renters, according to the Census Bureau. One in three U.S. homes has no mortgage, the bureau said.

So first, lets take look at the numbers the census bureau throws out (click on the tables to read) -

They throw out seasonal properties, all vacant properties, new construction and manufactured properties. This eliminates the possible 17,511,000 mortgages. Next we must eliminate the renters - which reduces the pool by another 35,045,000. It seems somewhat strange to get an accurate analysis on the housing bust by discounting rentals - especially since so many states renters are evicted when the property is foreclosed. New Jersey is one of the few state that protects the renters when the ownership changes or gets foreclosed - but many others are not so lucky. Watch the following which has been happening throughout the country -

Now, that we know we are only looking at owner-occupied properties that are not seasonal, vacant or rentals we can focus on the numbers of mortgages just for the properties left. From the Census -
And notice the specific wording from the US Census from their press release -

Among the 75.6 million homes that were owner-occupied, 24.9 million units, or one in three, were owned free and clear without a mortgage.
This supposedly takes in all loans -

Mortgages currently on property.
Publications. The owner or the owner’s spouse was asked
the number of mortgages or similar loans (including home
equity loans) currently in effect on the home. Data are
shown for the number of units with the following mortgage
categories: owned free and clear, reverse mortgages,
regular, and home equity.

A mortgage or similar debt refers to all forms of debt for
which the property is pledged as security for payment of
the debt. It includes such debt instruments as deeds of
trust, trust deeds, mortgage bonds, home-equity lines of
credit, home-equity lump-sum loans, and vendors’ liens. In
trust arrangements, usually a third party, known as the
trustee, holds the title to the property until the debt is
paid. In home-equity lines of credit, home-equity lump sum
loans, and vendors’ lien arrangements, the title is
kept by the buyer but the seller (vendor) reserves, in the
deed to the buyer, a lien on the property to secure payment
of the balance of the purchase price. Also included
as a mortgage or similar debt are contracts to purchase,
land contracts, and lease-purchase agreements where the
title to the property remains with the seller until the
agreed upon payments have been made by the buyer.
See also the definitions ‘‘Current interest rate,’’ ‘‘Items
included in primary mortgage payment,’’ ‘‘Lenders of primary
and secondary mortgage,’’ ‘‘Lower cost state and
local mortgages,’’ ‘‘Major source of down payment,’’
‘‘Monthly payment for principal and interest,’’ ‘‘Primary
mortgage,’’ ‘‘Remaining years mortgaged,’’ ‘‘Term of primary
mortgage at origination or assumption,’’ ‘‘Total outstanding
principal amount,’’ ‘‘Type of primary mortgage,’’
‘‘Year primary mortgage originated,’’ ‘‘Reason primary
mortgage refinanced,’’ ‘‘Cash received in primary mortgage
refinance,’’ ‘‘Percent of primary mortgage refinanced
cash used for home additions, improvements, or repairs,’’
‘‘Percent of non-refinanced primary mortgage, including
home-equity lump-sum, used for home purchase and
improvement,’’ ‘‘Total home-equity line-of-credit limit,’’
‘‘Total outstanding line-of-credit loans,’’ ‘‘Current line-of credit
interest rate,’’ ‘‘Line-of-credit amount used for home
additions, improvements, or repairs,’’ and ‘‘Line-of-credit
monthly payment.’’
A-16 Appendix A American Housing Survey for the United States: 2007

Here is the data for mortgage types -

So remember the statistic is not one in three homes does not have a mortgage - it is one in three owner occupied, non-rental, non-seasonal, properties does not supposedly have a mortgage.

Another part to note is that 42% of the non-mortgaged properties are located in the South. As for the other regions - 18% of the owner occupied properties are the Northeast, 23% in the Midwest and just under 17% are in the West. And in terms of overall percentage of property owned per area - in the South 36% of all owner occupied properties have no mortgage, in the Northeast 33% of all owner occupied properties have no mortgage, in the Midwest 31% have no mortgage, and in the West its 26%.