California Free-and-Clear Homes Report 2026

Updated October 2026. About one in three California homeowners has no mortgage: the U.S. Census Bureau’s American Community Survey (ACS) 2020-2024 estimates count 2,469,964 homes owned free and clear, or 32.6% of the state’s 7,567,568 owner-occupied homes, and the share reaches 52.3% among owners aged 65 and older. Among homes that still carry a mortgage, ATTOM classified 45.6% as equity-rich in the second quarter of 2026, down from 56.9% a year earlier. This report covers where paid-off homes are, what owning outright changes at sale, and the tax rules to review before listing.

How many California homes are owned free and clear?

About one in three: the Census Bureau’s ACS 2020-2024 estimates put 32.6% of owner-occupied California homes, or 2,469,964, in that category. The single-year 2024 ACS puts the share at 33.9%, compared with 40.3% nationally, and a January 2026 Census Bureau story reported that the national share rose from 34.4% in 2010-2014 to 39.4% in 2020-2024.

Age is the clearest dividing line: 52.3% of California owners aged 65 and older have no mortgage (ACS 2020-2024). Two rules covered below matter most for them: Proposition 19’s property tax transfer for owners 55 and older, and the basis rules for inherited homes.

Where are paid-off homes most common?

Rural Northern California and the Eastern Sierra lead. In the ACS 2020-2024 data, more than half of owner-occupied homes have no mortgage in Trinity (62.3%), Inyo (61.0%), Modoc (58.5%), Siskiyou (50.8%) and Plumas (50.3%) counties. The lowest shares are in and around the Bay Area: San Benito and Solano (27.9% each), Contra Costa (28.9%), Alameda (29.7%) and San Joaquin (30.2%).

Totals tell a different story. Los Angeles County’s share (32.0%) is close to the statewide figure, but its 501,568 free-and-clear homes are the most of any county, followed by Orange (201,488), San Diego (194,335) and Riverside (168,261). Older owners are more likely to own outright in every county, from 78.5% of owners 65 and older in Inyo to 46.1% in Solano, the lowest (ACS 2020-2024). Small-county estimates carry wider margins of error.

What changes when you sell a home you own outright?

The main difference is that no lender has to be paid off: escrow needs no payoff demand, the net proceeds after closing costs go to the seller, and any type of buyer can be considered. Selling as-is to a cash buyer is one option alongside listing with an agent; see how a direct cash sale works.

Owning outright does not mean the title is clear of everything. Escrow still reviews a preliminary title report, and these items are generally settled from the seller’s proceeds:

• Property taxes. With no lender impound account, owners pay the county directly. Bills come in two installments, due November 1 and February 1 and becoming delinquent December 10 and April 10 (Board of Equalization Publication 29), and escrow generally prorates the current year.
• HOA dues, including any unpaid special assessments.
• Home equity lines. A home equity line of credit is recorded against the home and generally must be paid off and released at closing.
• PACE assessments. Solar or energy upgrades financed through a Property Assessed Clean Energy (PACE) program are repaid on the property tax bill, and the state Department of Financial Protection and Innovation (DFPI) warns that the lien stays until the contract is paid off, which can complicate a sale.
• Other liens, such as judgment or mechanics’ liens.

State withholding also applies. Under Revenue and Taxation Code Section 18662, escrow generally withholds 3 1/3% of the sales price unless an exemption applies, such as a home last used as the seller’s principal residence or a price of $100,000 or less, or the seller elects a calculation based on estimated gain (Franchise Tax Board Publication 1016). Sellers of inherited homes and rentals should raise Form 593 with escrow early.

What do Proposition 13 and Proposition 19 mean for long-time owners?

A long-time owner’s low taxable value generally does not pass to the buyer. Under Proposition 13, property is reassessed to market value only when it changes ownership or is newly built, annual increases in that base year value are generally limited to 2%, and the tax rate is limited to 1% plus voter-approved debt (Board of Equalization Publication 29). A sale is a change in ownership, so the buyer gets a new base year value, with a supplemental assessment for the gap between it and the old taxable value, and can face a much higher tax bill than a long-time seller paid.

Owners 55 and older can take their base value with them. Under Proposition 19, a homeowner who is at least 55, severely and permanently disabled, or the victim of a wildfire or a natural disaster declared by the Governor can transfer the taxable value of a primary residence to a replacement primary residence anywhere in California bought or built within two years before or after the sale (BOE). Owners 55 and older or disabled can do this up to three times. The claim (form BOE-19-B for owners 55 and older) is filed with the assessor in the replacement home’s county, not through escrow.

How is the gain taxed when you sell a paid-off home?

Paying off the mortgage does not change how a sale is taxed. The IRS figures gain by subtracting your adjusted basis from the amount realized, and the cost of improvements such as a new roof or a kitchen modernization is added to basis (IRS Publication 523), so long-time owners should gather those records before selling.

For a main home, the federal exclusion generally covers up to $250,000 of gain, or $500,000 for a married couple filing jointly, if the owner owned and lived in the home for at least two of the five years before the sale and has not excluded gain on another home in the prior two years (IRS Topic 701).

Inherited homes work differently. The basis of inherited property is generally its fair market value on the date of death (IRS Publication 551), so an heir who sells soon after inheriting is generally taxed only on any change in value since then. In community property states such as California, when one spouse dies the total value of community property, including the survivor’s half, generally becomes the new basis if at least half of the community interest is includible in the decedent’s gross estate (IRS Publication 551). A surviving spouse selling a long-held, paid-off home may therefore owe less than expected; a CPA should review the numbers first.

How much equity do California homeowners with a mortgage have?

Fewer than half are equity-rich, and that share is falling. ATTOM’s Q2 2026 Home Equity & Underwater Report classified 45.6% of mortgaged California homes as equity-rich, meaning loan balances of no more than 50% of estimated value, down from 56.9% a year earlier and one of the five largest annual drops among states; the national share was 41.1%. ATTOM’s state rankings show 2.3% of mortgaged California homes seriously underwater, owing at least 25% more than the home’s estimated value, up from 1.4% a year earlier, versus 3.2% nationally. Among large metro areas, San Jose had the highest equity-rich share in ATTOM’s report (59.1%), while Fresno had one of the lowest (18.1%) and the second-highest seriously underwater rate (10.9%).

Cotality’s Homeowner Equity Insights report put the average equity of a California mortgage holder at $626,900 in the first quarter of 2026, second only to Hawaii ($688,000). Owners who owe close to their home’s value face different choices, covered in our foreclosure report.

Frequently asked questions

Methodology and sources

Free-and-clear figures come from the U.S. Census Bureau’s ACS 2020-2024 five-year estimates (tables B25081 and B25027, via Census Reporter), the 2024 one-year table DP04 and a Census Bureau story. They cover owner-occupied homes only, excluding rentals, second homes and vacant properties. The ACS counts deeds of trust, contracts to purchase, junior mortgages and home equity loans as mortgage debt; since 2020, a home equity loan reported alone is not treated as a first mortgage (ACS subject definitions). Equity figures are from ATTOM’s Q2 2026 Home Equity & Underwater Report (August 20, 2026), ATTOM’s state rankings and Cotality (July 23, 2026).

Rules are summarized from IRS Topic 701, Publication 523 and Publication 551; Board of Equalization Publication 29 and Proposition 19 guidance; Franchise Tax Board Publication 1016 and Form 593 instructions; and DFPI’s PACE guidance.

More research: browse all Cash Home Buyers CA research reports, including the California Mortgage Rate Lock-In Report 2026, the California Home Selling Costs Report 2026 and our probate and inherited home report. If you are weighing a sale, learn how a direct cash sale works, read about selling an inherited property, or check where we buy.