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July 2020

We're not #1

July 6, 2020

Seattle ranked in the bottom 10 of cities whose residents have not paid off their home loans, according to a new study from Construction Coverage, which reviews financial products, software, and insurance for the construction industry.

Only 18% of owner-occupied homes in the Seattle-Tacoma-Bellevue area are paid off, according to the research findings. That puts Seattle 48th among 53 metro areas in the study. The Washington-Arlington-Alexandria area was last on the list with only 14.6% of homes paid off.

New Orleans-Metairie, Louisiana ranked first, with its 32.5% share of owner-occupied homes that are paid off. Detroit was 2nd with 30.6%, followed by Houston (30.5%), San Antonio (30.1%) and Miami-Fort Lauderdale-West Palm Beach (29.6%).


Rank

Metro Area

Share of owner-occupied homes that are paid off

Median home value (w/o mortgage)

Median home value (w/ mortgage)

Median household income (w/o mortgage)

Median household income (w/mortgage)

Median monthly housing costs (w/o mortgage)

Median monthly housing costs (w/ mortgage)

1

New Orleans

32.5%

$175,000

$215,000

$60,000

$90,000

$411

$1,491

43

Seattle-Tacoma-Bellevue

18.0%

$450,000

$480,000

$100,100

$131,000

$511

$1,584

53

Wash-Arlington-Alexandria

14.6%

$410,000

$420,000

$116,000

$145,000

$760

$2,378

Source: Construction Coverage


According to the study, which was based on data from the U.S. Census Bureau, more than 38% of owner-occupied housing units nationwide are owned free and clear. For homeowners under age 65, the share is 26.4%.

Among states, Washington was 43rd, ahead of last-place Maryland. West Virginia topped the list, followed by Mississippi, Louisiana, New Mexico and North Dakota.

Although the rankings by Construction Coverage were based on the share of owner-occupied homes that were paid off, researchers also calculated the median home value, median household income, median monthly housing costs and housing costs as a percentage of income for households with and without a mortgage. The report included results for large (1,000,000 or more), midsize (350,000-999,999) and small (100,000-349,999) metro areas.

Only households with homeowners under age 65 were included. Metropolitan area with fewer than 100,000 people were removed.

The study indicated metros with the larges shares of residents who have paid off their homes tend to be places with lower home values and cheaper to live in. "Across these metros, homeowners who have paid off their mortgages also have lower median household incomes and monthly housing costs," the researchers stated.

When considering demographics, researchers found mortgage payoff rates vary substantially.

A comparison of age groups showed people aged 19 to 25 are more likely to have paid off their mortgages than people aged 26 to 44, but researchers said the rates of homeownership among this age group are much lower. "The same phenomenon is present when looking at educational attainment among homeowners," the analysts stated. "People with less than a high school degree are much less likely to be homeowners, but those who do own homes are more likely to be mortgage-free."

Researchers noted mortgage delinquencies tend to rise significantly during recessions. "Housing costs are often the biggest line item for most people's budgets, and the current economic downturn has made it difficult for many people to pay their mortgages," acknowledged Jonathan Jones, a writer at Construction Coverage.

Citing quarterly data from the Federal Reserve Bank of New York, the analysts found the delinquency rate on mortgages peaked at over 8% during the Great Recession and declined to below 1 percent in 2019.

The national delinquency rate nearly doubled between March and April of this year - the largest single-month increase ever recorded, according to data from Black Knight, a real estate technology company.

In addition to the Census Bureau, Construction Coverage uses data from the Bureau of Labor Statistics and other agencies. Recent reports have covered manufactured housing (and where it's on the rise), cities with the sharpest drop in construction activity amid COVID-19, cities with the most small businesses, cities with the most cost-burdened households, best cities for millennial home buyers, and best cities for first-time home buyers.