Student debt is holding back would-be homebuyers – study

by Ryan Smith16 Jun 2016
The vast majority of non-homeowners with student loans believe their school debt is preventing them from purchasing a home, according to a new study.

A joint survey conducted by the National Association of Realtors and consumer literacy program SALT found that 71% of non-homeowners who are repaying their student loans on time believe that that debt is keeping them from purchasing a home. Slightly over half of all borrowers believe they’ll be delayed from buying for over five years, according to the NAR.

The survey polled student debt holders who were current in their repayment, according to the NAR. Forty-three percent of those polled owed between $10,001 and $40,000, and 38% owed $50,000 or more. The most common debt amount was between $20,000 and $30,000, NAR reported. Millennials saw the highest share of borrowers who felt student loans were delaying their ability to purchase a home, at 79%.

Lawrence Yun, NAR chief economist, said the findings highlighted the effect student debt is having on the housing market. Many college graduates are delaying homeownership because of the years they expect to be paying on their student loans – at an interest rate that can be nearly double current mortgage rates, according to the NAR.

“A majority of non-homeowners in the survey earning over $50,000 a year – which is above the median U.S. qualifying income needed to buy a single-family home – reported that student debt is hurting their ability to save for a down payment,” he said. “Along with rent, a car payment and other large monthly expenses that can squeeze a household's budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase.”

Among those who said student debt was stymying their plans for homeownership, more than three quarters – including more than 80% of millennials – said they couldn’t save for a down payment. An additional 69% said they didn’t feel financially secure enough to buy, and 63% said they couldn’t qualify for a mortgage because of high debt-to-income ratios.
 

COMMENTS

  • by Alex | 7/1/2016 7:06:43 AM

    Unfortunately, that is a reality. I have seen clients with just student mortgage debts, no other type of debt, and they do not qualify to buy a home due to the high DTIs....

Poll

Is TILA-RESPA a good or bad thing long term?