California’s Mortgage-Free Homeowners: A Growing Trend

California is home to two million homeowners who are living the American Dream mortgage-free, according to new census data. The state saw a 20 percent increase in the number of debt-free homes over the past decade, with 29 percent of all owner-occupied residences in California now mortgage-free.

This trend is surprising in an era where housing affordability is a hot topic and overall homeownership numbers have been declining. The increase in mortgage-free homes in California outpaced the national average, with the state’s debt-free flock growing by 339,000 homes.

Factors contributing to this trend include the aftermath of the housing bubble, where many Californians lost their homes to foreclosure and are now opting to avoid debt. Additionally, an aging and more stable population in California is choosing to pay off their home loans, while historically low-interest rates have motivated some owners to pay off their mortgages or make all-cash purchases.

In Southern California, mortgage-free living is equally common across all counties, with Orange County seeing the fastest growth in debt-free homeowners. Los Angeles County had the most homeowners living mortgage-free last year, with 405,000 debt-free homes.

Despite having a lower median household income compared to mortgaged households, mortgage-free Californians enjoy significantly lower monthly housing costs. The decline in mortgaged homes is not just a California issue, as the number of mortgaged homes has decreased nationwide by 9 percent over the past decade.

The trend towards mortgage-free living is expected to make the housing market more resilient to economic downturns, as cash buyers become preferred bidders in a tight housing market. The significant wealth held by mortgage-free owners in California could potentially be tapped through loans or sales, or passed down as a family nest egg for future generations.

Overall, California’s mortgage-free homeowners control roughly $875 billion worth of housing, representing one-sixth of the national total held by debt-free owners. Despite having a smaller share of mortgage-free ownership compared to other states, California’s significant wealth in this area highlights the state’s unique position in the housing market.