In this video, host Sam (Jason Hartman) explains why the U.S. housing market is unusually resilient in 2024, focusing on the unprecedented share of mortgage‑free homes. He cites a record 38.5% of all homeowners owning their property outright and notes that over half of owner‑occupied units are mortgage‑free, while 96% of existing mortgage debt is fixed‑rate, providing a strong cushion against the Federal Reserve’s rapid rate hikes. Sam observes a modest decline from a previous 42% level, attributing it to a shift from fix‑and‑flip investors to buy‑and‑hold investors who deliberately use leverage. Using an interactive county‑level map, he highlights stark geographic variation: Midwest and Texas counties often exceed 70% free‑and‑clear ownership, whereas coastal metros like Los Angeles (≈31%) and New York (≈34‑38%) are much lower, even in expensive markets like Palm Beach (≈47%). He links these patterns to his classification of markets as linear, cyclical, or hybrid, arguing that linear markets—characterized by higher free‑and‑clear rates, lower leverage, and higher improvement‑to‑land value (LTI ratio)—pose less downside risk. The Hartman Risk Evaluator (LTI ratio) is presented as a tool to identify such low‑risk markets. Sam concludes with investor guidance: prioritize linear or hybrid markets, accept modest appreciation in exchange for reduced volatility and better cash flow, and recognize that a scarcity of distressed, mortgage‑bound homeowners limits the potential for a broad market correction.
Chapters
We've got a great show for you today. If you are interested in saving money on life's largest expense, you know what I'm going to say, that's taxes. And I know, I can hear it. Now, a lot of people out there say taxes are so boring. Yeah, I guess I understand that. But you know, they get pretty exciting when you see how much you can benefit, especially with the most tax free favored asset class in America, Income property, our very favorite asset class. I want to talk to you about free and clear houses. And again, as I've said so many times, in order to have a real estate market correction or a crash, you've got to have people in distress. And it's important to look at how many people or institutions own homes free and clear with no mortgage. Now interestingly, this is not as simple as it might seem on the surface. Why is that? Well, because you can drill down on these numbers. How many non owner occupied homes are free and clear versus how many owner occupied homes are free and clear? How many in given areas. I'm going to show you a really enlightening interactive map of the United States showing the numbers of free and clear versus mortgaged properties in all of these different geographies around the US this is going to be very interesting folks, so stay tuned for that. Coming up in just a second. So the headline here is a record number of mortgage free homeowners provide an economic cushion amid the Fed's fastest rate hiking cycle in 54 decades. Not only is 96% of the mortgage debt in the US fixed rate debt, which is a sign of greater security in terms of the market, but 38.5% of homeowners don't have a mortgage at all. Now compared to what that number is actually down a little bit. It used to be 42%. My theory on why this has changed. Well, it's a slight difference, but it is a little bit of a difference. You know, about three and a half percent fewer people are owning their properties free and clear. And when I say people use that as a proxy for people or institutional investors. And why I think that has changed is I think that there is so much, what you might call smart money in the market and you know, that's these institutional buyers and investor money. There's so much investor money in the market and less of that investor money is fix and flip investor money. More of it is buy and hold investor money. So as such investors are more keen on leverage, they're more keen on debt. They understand the value of, of using debt and getting leverage on your investments. That's a great thing. We've talked about that for 20 years, of course. And so that's why I think we've seen a slight decline in the number of free and clear homes. But it is still a record number. Historically, a lot of people owning their homes free and clear. People or institutions. I've highlighted this with a red rectangle because it says over half of owner occupied units are mortgage free. Now we want to break this down into investor and owner occupied units. And so 38% is the overall number in terms of free and clear homes in the US no mortgage at all. But when it comes to owner occupied, over half of the housing stock is free and clear. How do people get into distress with no mortgage? It's extremely difficult. It's extremely difficult to have distress. So again, these people are very comfortable. Look at this interactive map if you're watching on video. Now, basically what you're seeing here is you are seeing the vast majority of free and clear homes right down the center of the U.S. so if we hover over Los Angeles county, where I grew up, La, 30.8% of homes in LA are free and clear. Orange county, where I sort of had my second growing up and lived the longest my adult life was In Orange County, 31.4% are free and clear. Now let's compare this. Let's go to Briscoe County, Texas, 80.67% are free and clear. Basically 81% of homes are free and clear. Now let's go to, oh, how about if we say Alabama, Wilcox county, Alabama is 69.9%, so 70% free and clear. You know, let's go up to the Pacific Northwest. Let's go up in the Seattle area. Right? And here we see that many fewer homes, regardless of the county we're hovering on, are free and clear. You only have, you know, 30, 40%, maybe, maybe 50% in some places are free and clear. But again, not nearly as many as down the center of the U.S. so, gosh, what county do I want to go to? You look, in Nebraska you've got 60% free and clear. You look at South Dakota, 75% free and clear. You know, more. South Dakota, 73% free and clear. North Dakota, 68.2% free and clear homes. Let's go down to Texas. Okay, you look in a whole bunch of areas in Texas. You know, there's a lot of counties in the US here, so hovering over the right exact county is somewhat difficult. But you know, most of these Texas counties You see, they've got 50 to 70% free and clear houses. Here's one, 77% free and clear. Over here you've got 85% free and clear. And this is a lot of Texas, they own their houses free and clear. Let's go over to Florida, okay? Here where I live, let's go to, okay, palm Beach County, Florida, 46.5% free and clear. Now that's interesting because Palm beach county is pretty darn expensive. Not as expensive as Los Angeles, mind you. So here We've got basically 47% free and clear. Let's go back to LA. We only 31% free and clear. You see the difference, right? So remember I've taught you for 20 years about the difference between the three major types of markets, linear markets, cyclical markets and hybrid markets. The more cyclical the market, the fewer free and clear houses, the more debt, the more leverage and the more risk for market correction is in the system. Look up at some of the expensive northeastern markets. You know, you look at the Boston area, you look at the New York area, and here, I mean, very low numbers comparatively of free and clear homes. Trying to hover on something, you know, all of these, I mean, Bridgeport, Connecticut, 34% free and clear. Let's go down to New York. Okay, so Westchester County, New York, 38% free and clear versus where I am here in Florida, you've got 46% free and clear. Right? You look at the less expensive markets that aren't even hybrid, that are just pure linear markets. You have got the vast majority of people owning those homes free and clear and simply very likely to ever see any, any distress whatsoever. So I thought this was very enlightening and I really wanted to share it with you because again, the one ingredient that you absolutely must have if you want to have a real estate correction or crash is you must have million of distressed homeowners who become millions of distressed home sellers. So what is the takeaway? What is the lesson? Well, you know, I've taught you about the Hartman risk evaluator where we talk about the LTI ratio, the land to improvement ratio, and how the lower risk markets, the more linear markets are lower land value markets and higher improvement value. The home sitting on the land as a ratio that sets a floor on downside risk. Those are more linear and you've got much less leverage in the more linear markets and better cash flows to boot. So you want to lower your risk, you want to be a prudent investor, be in the linear and maybe some of the hybrid markets, you won't see the radical appreciation, and you might be jealous or green with envy of people in those markets during certain times, but more likely than not, overall over the long term, you are going to win the appreciation game because the downside risk and the givebacks and the losses during the correction phases of the market cycle, you're just not going to give as much back as those people in those cyclical markets are. Sam.
