Volume of Homes with Mortgage Falling

During the same time frame of the household-owned value of the U.S. housing market reaching an all-time high of $26.12 trillion, the share of homeowners with a mortgage is at 62.9%—the lowest level since 2005—according to the Urban Institute. 

The report states the $26.12 trillion in value is made up of two elements: $10.36 trillion in outstanding mortgage debt and $15.76 trillion in home equity. 

While mortgage debt has grown in recent years, the recovery in home values has lowered the mortgage debt-to-home value ration from 63.3% in 2009 to 39.6% in Q1 2019. The housing equity share of aggregate home values has grown from 36.7% to 60.5% during the period of time. 

The Urban Institute also states that the declining amount of homeowners that have a mortgage is a key factor. According to the report, the share of homeowners with a mortgage has declined since 2008 to 2017 from 68.4% to 62.9%. Also, the number of owner-occupied homes without a mortgage grew to 37.1% over the same time frame. 

In 2017, just 48.44% of homes had a mortgage, compared to 28.5% that did not. 

Among the possible reasons for this shift is the surge of all-cash sales in the years following the recession, a focus on debt reduction, and tight conditions with mortgage credit. 

This shift is also represented in generational differences. Households with older occupants are more likely than younger homeowners to have paid off their mortgage. However, the share of older homeowners with a mortgage has increased gradually 38% in 2017 for those 65-year-old or older. 

The amount of homeowners that have a mortgage, and are younger than 35, has fallen 83% in 2017 from 89% in 2009.

“As the baby boomer generation ages, younger households will become more important to lenders. If new and younger purchasers increasingly use cash instead of mortgages to buy their homes, competition among lenders will increase, which, in turn, may help ease the restrictive credit standards in place today,” the report stated.