According to a survey recently released by the National Association of Realtors, high levels of student loan debt are largely responsible for holding back the housing market. As non-homeowners struggle to repay their student loan debts, they continue to find themselves unable to afford buying a home.
Student Loan Debt Weighs Heavily on Non-Homeowners
The National Association of Realtors survey found that 71 percent of non-homeowners have put off purchasing a home due to their student loan debt. In many cases, the non-homeowners have put off purchasing a home for more than five years due to the debt. Furthermore, nearly 40 percent of respondents report that their student loan debt is more than $50,000. The few hundred dollars they pay toward their student loan debt equates to thousands of dollars over the years that could have gone toward saving for a home.
Millennials Struggle with Buying a Home
While people of all ages are struggling with student loan debt, Millennials are the ones who are carrying the brunt of the burden. Despite the fact that homeownership offers many benefits – including tax breaks, the opportunity to build value and lower mortgage payments when compared to the rent on a comparable home – rent is so high in some cities that it is nearly impossible to save the recommended 20 percent down payment for purchasing a home. In Boston, for example, the percentage of income needed for rent is 35.1 percent. The percentage of income needed for a mortgage, on the other hand, is much lower at 22.2 percent.
Interestingly, research has shown that Millennials still strongly associate homeownership with achieving “The American Dream.” While 56.9 percent of those aged 50 through 64 felt this way and 58.4 percent of those aged 35 through 49 felt this way, an impressive 65.3 percent of those aged 18 through 34 associated homeownership with achieving the American Dream. This was even higher than those aged 65 and over, with 63.9 percent reporting feeling this way. Despite their desire to own a home, only 9.2 percent report that they plan to purchase a home in the next year. The vast majority – 33.2 percent – do not expect to purchase a home for another three to five years.
Lack of Homebuyers Hurts the Economy
Of course, lack of homebuyers has a direct impact on the economy. Not only does it result in a slowdown in home purchases, but it also results in less sales for home improvement supplies and less hiring of tradespeople such as painters, remodelers, roofers and landscapers. In all, the National Association of Realtors estimates that one job is created by every two home sales. As of 2014, each home sale at the median resulted in more than $72,000 in economic impact when accounting for factors such as new furniture, moving expenses and income earned by housing professionals.
Some research has also indicated that homeownership offers a number of social benefits as well. For example, homeowners tend to be more actively engaged members of society with greater civic participation. The children of homeowners also tend to perform better in school and graduate from high school at greater rates.