WASHINGTON (June 13, 2016) – Student loan debt is a significant factor in keeping millennials out of the home buying market, the National Association of Realtors reported Monday.
According to a new joint survey on student loan debt and housing from the Realtors and SALT®, a consumer literacy program provided by nonprofit American Student Assistance®, 71% of non-homeowners repaying their student loans on time believe their debt is stymieing their ability to purchase a home. Slightly more than half of all borrowers say they expect debt will delay a home purchase by more than five years. And 40% said debt is keeping them at home with parents/family after graduation.
The percent share is the highest among older millennials approximately aged 26 to 35 (79%) and those with $70,000 to $100,000 in total debt. Regardless of the outright amount of student debt, more than half of non-homeowners in each generation report that it’s postponing their ability to buy.
The survey polled student debt holders current in their repayment mostly incurred attending a four-year public or private college. 43% percent reported between $10,001 and $40,000 in student debt; 38% had $50,000 or more. The most common debt was $20,000 to $30,000.
“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 home2 – reported that student debt is hurting their ability to save for a down payment,” said Lawrence Yun, NAR chief economist. “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 non-homeowners who believe student debt is delaying their ability to buy, more than three-quarters – including over 80% of millennials – said their delay is because they can’t save for a down payment. Additionally, 69% don’t feel financially secure enough to buy, and 63% can’t qualify for a mortgage because of high debt-to-income ratios. Yun noted that interest rates, most often higher than those associated with mortgages, make saving even more difficult.
A majority of those polled (52%) expect to a five-year-plus delay in purchasing a home because of repaying their student debt. Not surprisingly, those with higher amounts of student loan debt and those with lower incomes expect to be delayed the longest.
Nearly half (46%) of young millennials polled currently live with family (both paying and not paying rent), and 42% reported that student debt delayed their decision to move out of their family member’s home after college.
Highlighting the difficulty many college graduates faced finding employment either before or immediately after the Great Recession, those who graduated six to 10 years ago had the longest delay, with 33 percent saying 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,” added Yun. “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.”
The survey also found that student debt is affecting overall housing supply by holding back some current home owners who otherwise would like to sell. Nearly a third of current homeowners (31%) said student debt is postponing them from selling their home and purchasing a new one. Of those, 18% believe it is too expensive to move and upgrade to a new home, 7% have problems with their credit caused by student loan debt, and 6% are underwater because student debt has limited their ability to pay more than the minimum payment on their mortgage.
In April 2016, SALT distributed a 33 question survey co-written with NAR to 75,000 student loan borrowers who are current in repayment. A total of 3,230 student loan borrowers completed the survey. The survey had a response rate of 4.3 percent. All information is characteristic of April 2016, with the exception of income data, which is reflective of 2015.