• Student Loan Debt Is Not Solely To Blame For Low Millennial Homeownership Rate

    By Scott Dick, Government Affairs Director, Monterey County Association of REALTORS®

    Many housing experts expected the homeownership rate – which has been declining since 2004 – to rebound as Millennials entered the housing market. Instead, the homeownership rate has continued to decline. Even the homeownership rate for the under-35-year-old segment of the market has declined. Many theories have been advanced for the slower-than-average entry into homeownership of Millennials, particularly student loan debt.

    • Freddie Mac’s monthly report for September states that student loan debt does play a role in the low homeownership rates among millennials, but it does not fully explain why this generation is slow to purchase a home.

    • The report states, “Student loan debt alone can’t explain the low homeownership rate among millennials. After all, the homeownership rate in this cohort has dropped 5 to 6 percentage points for student loan borrowers and non-borrowers alike.”

    • Pre-crisis homeownership rates of 27-to-30-year-olds with student loans, with at least some college education, were 2 to 3 percent higher than homeownership rates of those with no student loans. This gap started to close during the recession and changed direction in 2011.

    • The homeownership rate of borrowers was about one percentage point lower than the rate of non-borrowers by 2014.

    • One explanation is graduates of four-year institutions whose return on their education investment is less-than-expected, so their wages are less than anticipated.

    • Furthermore, borrowers who completed their degrees and found that their post-college earnings are matching their expectations may be delaying a purchase for other reasons.

    • As for those who were economically worse off than before they started school, they have no improvement in their job prospects but they have significant student debts to repay.

    posted to Cedar Street Times on October 15, 2015

    Topics: Front PG News


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