One thing that could be attributing to the housing market’s lackluster performance is student loan debt. It has been a topic of discussion over the past few years; the amount of student loan debt that today’s college graduates rack up is at all-time highs. On average, college graduates have $35,000 in student debt and as college expenses increase every year, this amount is only projected to grow. Student loan debt is in excess of $1 trillion today.
With such high levels of debt accumulated right out of school, this leaves typical would be first-time homebuyers with less disposable income and makes it harder to qualify for a mortgage. Couple this with still high unemployment rates for young workers (ages 25-34) and it really impacts housing. In April, first-time homebuyers accounted for just 29% of existing homebuyers, which is down from historical rates of around 40%, according to the National Association of Realtors.
This lack of homeownership has recent grads either renting or still living at home with mom and dad. This is good news for the rental market which continues to show signs of strong demand. Jed Kolko, Trulia’s chief economist commented, “For young people, the housing recovery is still in an early stage: More jobs today means they move out of their parents’ homes and become renters, while home buying remains years away for many.”
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