The National Association of Realtors® (NAR) in hand with SALT® recently reported that student debt accounts for 10 percent of all outstanding debt in the U.S. today. As this debt grows, the rate of home ownership has fallen, most notably in the younger generations. Interestingly, it is not just first time home purchases that are being affected by student debt. First time sellers who are still managing repayment of a student loan are also wary of selling their homes.
Student debt is making saving difficult while affecting financial security.
The survey conducted by NAR® and SALT® looked at the challenges faced by student debt holders and how it is impacting their first home purchases. Some of the overall numbers:
67 percent of loans are from a four-year college and 31 percent from a two-year college
27 percent from graduate/post-graduate school
11 percent from a technical college
24 percent remained living at home for at least two years following graduation due to their student loans
18 percent are currently homeowners
17 percent do not currently pay rent by living with friends or family
For those who do not currently own their home 71 percent blame their student loan debt as the main reason they are unable to buy a home. Student debt has made it difficult or even impossible for prospective first time buyers to save for a down payment even though 71 percent are currently employed.
Delayed Moving Comparison
When you look at the generations and the numbers who did not delay moving into their own place you can see a definite drop from Boomers to Millennials:
Older Boomers: 77 percent
Younger Boomers: 80 percent
Generation X: 79 percent
Older Millennials: 60 percent
Younger Millennials: 41 percent
When it comes to the amount of debt owing, not surprisingly 80 percent of those who owe more than $50,000 believe their debt will continue to delay their ability to purchase a home. There are also small percentages of people who believe their current debt has no impact on their delay in purchasing a home. 10 percent claimed they had no interest in owning a home at this time while 5 percent stated that their debt was not related to their decision to make a move or purchase a home.
Why is Student Debt Causing Delays?
The number one reason cited for not being able to purchase a home was the difficulty faced in saving for their down payments. 78 percent felt they could not save enough to put down on a home with millennials having the most trouble saving. 63 percent feared their debt-to-income ratios would keep them from qualifying for a mortgage, with Generation Xers being the most common to express this fear. Baby Boomers were the most common to express concerns about financial security. 69 percent of those surveyed cited financial security as the reason for delaying a home purchase.
Other delays not solely connected to student debt included 47 percent feeling they could not afford to move into their preferred neighborhood as well as 19 percent who did not feel comfortable with their knowledge of the housing market.
As mentioned, it is not just purchasing a home that is being affected by student debt. 31 percent of those who currently own a home and carry student debt feel they are not in a position to sell their home and buy a new one. 18 percent feel a move to a new home is not an option due to the expense of housing prices with Older Baby Boomers being the most common age group to cite this as a reason for not making a move. Credit challenges are most commonly cited by Younger Baby Boomers due to student debt which is affecting 7 percent of those surveyed while 6 percent are currently living in homes that are underwater.
You can read the full report here.