A recent report on the economy showed that there are more than 9,000 foreclosures per day, on average, across the USA. But in some regions, especially those where prices didn't experience dramatic escalations during the real estate bubble, the housing markets are relatively stable.

No-mortgage homes seem like a fairy tale in this foreclosure-prone economy. Millions of homeowners are fighting against adjustable-rate mortgages, hybrid loans, negative amortization, and massive home equity loan debt. Many are losing the battle and their homes to heartbreaking foreclosure. But for a surprisingly large segment of the population, no-mortgage homes are normal, and the vexing problems of mortgages and deteriorating home prices are not bothering them at all.

No-mortgage homes rule

According to newly released census data and reports from publications, including USA Today, there are about 15 or 20 small cities where the housing foreclosure crisis and mortgage meltdown is essentially a non-event. That's because approximately half of the residents who own a home have already paid off the mortgage. What's more, in more than 100 other places, the same no-mortgage home situation exists for at least 40 percent of the homeowners.

Despite all the doom and gloom surrounding the current mortgage crisis, about a third of American homeowners live in houses that have already been completely paid off, so they have no mortgages to pay off.
One reason this occurred is that, during the recent real estate bull market, people sometimes sold homes for such big capital gains that they could then turn around and pay cash-or an unusually large down payment-and buy a less expensive home. While these homeowners are enjoying mortgage-free living, the folks who bought from them are likely struggling with large mortgages and homes that are losing value every day.

Homeowners escape economic mess

As one might expect, many of the no-mortgage homes just happen to be in stable communities that were experiencing relatively flat economic activity prior to the current mortgage mess. In those places, prices never went up that much in the first place, so they didn't have that far to fall when the housing recession began. They were insulated, or isolated, from the sectors of the housing market where speculation was rampant, sales were fast and furious, and mortgage lending was pretty much out of control. And in some cases, the safe haven neighborhoods are populated with older homeowners who have been living in the same residences for many years and have gradually paid off their mortgages.

Even though people in these lucky cities and towns don't have mortgages, they're still worried. Since their local economies are tied to the greater economy, many fear that they'll lose their jobs, local manufacturing plants will close, and a prolonged recession will cause troubles, despite their mortgage-related good fortune.

Published on December 17, 2008