Homeowners Without Mortgages Rise 40% Since 2010

Over 30 million homeowners in the U.S. currently do not have a mortgage, a trend that reflects both the challenges and opportunities within the housing market. High home prices and elevated mortgage rates have made it increasingly difficult for Americans, particularly first-time buyers, to purchase homes. This situation has led many current homeowners, especially those with low or no mortgage payments, to stay put rather than sell, further limiting the supply of available homes and keeping prices high. As a result, fewer homeowners are tapping into their home equity due to the high cost of borrowing.

The quintessential American dream of homeownership has long been seen as a symbol of economic stability and a pathway to building wealth. However, the current housing market presents significant barriers for would-be homeowners. The number of first-time home buyers has plummeted from nearly 3.2 million in 2004 to just 1.14 million in 2024. This decline is largely due to the reluctance of older generations to sell their homes, fearing the relatively high mortgage rates. Mortgage rates, which were sub-3% during the pandemic, peaked at 8% in October 2023 and currently hover near 7%. This lack of supply has driven up home prices, making it even harder for younger generations to enter the market.

The share of homeowners without a mortgage payment has risen to 40% in 2023, up from 33% in 2010. This trend reflects a growing preference for outright homeownership and conservative borrowing. Assuming there are 86 million homeowners in the U.S., this means more than 30 million do not have a mortgage. While this is good news for those who own their homes outright, it poses a significant challenge for those trying to break into the housing market.

The housing market is particularly vulnerable for recent home buyers. There are early signs of risk building within specific markets and among specific borrower populations, such as those with limited equity or who are behind on student loans. People are not borrowing against their homes because the rates are too high and therefore risky. U.S. mortgage borrowers have $11.5 trillion of tappable home equity in their properties. However, their preference to tap into their equity has been more muted than between 2001 and 2008. This shift is due to borrowers focusing on paying down their mortgages and owning their homes outright, as they are more averse to riskier debt products like home equity lines of credit (HELOC).

According to an analyst, the continued slow pace of home equity extraction is likely due to factors such as higher mortgage rates, stricter underwriting standards, lower levels of mortgage lending by banks, and more conservative borrowing behavior. Borrowers used just 0.41% of available tappable equity in the first quarter of 2025, which was less than half of the typical withdrawal rate observed from 2009 to 2021. However, about 25% of homeowners are considering a home equity loan or HELOC in the next year. If the Federal Reserve moves forward with anticipated rate cuts, borrowing against home equity could become even more attractive in the second half of the year.

While the current situation presents challenges for new home buyers, the silver lining is that more people are building wealth and reducing debt by avoiding home equity loans. This trend highlights the dual nature of the housing market: while it is becoming increasingly difficult for new buyers to enter, those who already own their homes are benefiting from the stability and wealth-building potential of homeownership.