Student Debt Delays Buyers By 5 Years

June 14, 2016

Nearly three-quarters of non-home owners say that repaying their student loan debt is delaying their home purchase, according to a new survey by NAR and SALT, a program provided by the American Student Assistance. 

What’s more, more than fifty percent of consumers say they expect to be delayed from buying a home by more than five years. Forty percent of consumers surveyed also said that student debt was delaying them from moving out of a family member’s house after graduating from college. 

The student loan debt burden seems to be holding back older millennials, aged 26 to 35, and those with $70,000 to $100,000 in debt the most from home ownership, the survey finds. 

While a college degree increases the likelihood of stable employment and earning enough to buy a home, consumers graduating with student debt are putting home ownership on the backburner because of the multiple years it takes to pay off their student loans at an interest rate that is often nearly double current mortgage rates, says Lawrence Yun, NAR’s chief economist.

“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,” says Yun. “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.” 

The most common debt amount among the more than 3,200 student loan borrowers surveyed was between $20,000 to $30,000. Thirty-eight percent of those surveyed had $50,000 or more. 

Over three-quarters of the non-home owners surveyed say they are delaying home ownership because they can’t save for a down payment. Sixty-nine percent don’t feel financially secure enough to buy, and 63 percent say they can’t qualify for a mortgage because of high debt-to-income ratios. 

“REALTORS® work closely with our clients and consumers every day; we understand the severity of the problem,” says NAR Vice President Sherri Meadows. “This is not an abstract issue for us. This is why REALTORS® are leading the real estate industry in the discussion of student loan debt and its impact on housing by generating the most encompassing research on this topic.” 

Consumers who graduated with student loan debt six to 10 years ago had the longest delay to home ownership. Thirty-three percent say it took more than two years to move out of a family home. 

“Nearly three-quarters of older millennials, many of whom graduated at the peak or immediately after the downturn, said their ability to purchase a home is affected by student debt,” Yun says. “Add in the detrimental effects of low inventory as well as rents and home price growth outpacing wages and it’s mainly why the share of first-time buyers remains at its lowest point in nearly three decades.”

Source: National Association of REALTORS®