The housing update today provided much food for thought and the data to back up what many in the field acknowledge is emerging as topic #1 – How are Millennials going to pay for housing when many of them have student loan debts which are as big as house payments?
The issue was addressed in a number of ways in a high powered panel which included the following individuals and an address by the HUD Secretary, Julian Castro.
Rohit Chopra – US Department of Education
Meta Brown, PhD – Federal Reserve Bank of New York
Jessica Lautz – National Association of REALTORS
Mabel Guzman – 2016 NAR Student Loan Debt Work Group Chairwoman – Real Estate Broker
Amongst the findings which were of particular interest to me were the following:
ROHIT: Prior to the crisis, student loan debt was 5 Billion dollars. Post crisis, that amount has increased to over a TRILLION dollars. The average student loan debt is now over $29,000 per student. Over 7 million student loans are currently in default. According to Rohit, the two important pillars of obtaining an education and purchasing a home should never be oppositional elements of the American Dream. I agree!
META: Repayment issues are showing up across the board as this relates to the amount of money students make when they graduate. I find it significant that even students with incomes higher than $80,000 are experiencing increases in defaults. It occurs to me that this is not just a money crisis, it’s also a knowledge crisis. The need for financial education of borrowers was discussed in some detail. On the other end of the spectrum, Brown noted a rise in the level of borrowing by people over the age of 50. Debt levels in this age group have increased approximately 60 percent in recent years as people have to retool to new careers or are spending on HELOCS to make purchases which may have been delayed until kids were raised and out of the house.
BUT BEFORE YOU THINK THOSE KIDS ARE GONE FOR GOOD…
JESSICA: The average age of first time home buyers has actually remained pretty steady at 31 years of age. In recent years, there has been an urban myth floating around that Millennials don’t care as much as previous generations did when it comes to owning a home. Nothing could be further from the truth. Surveys and research indicate that the Millennial generation is very interested in home ownership, particularly as they start to raise families. Affordability is a big issue as they are dealing with double whammies that include student loan debt, rising rents and economic instability.
MABEL: Rounding off the briefing was the 2016 NAR Student Loan Debt Work Group Chairwoman. The group which started in 2014 and was restarted in 2016 continues to research trends that are emerging from the implications of rising debt levels in America. Mabel noted that debt repayments and down payments are the biggest concerns they have observed with success in the housing market for students. This is an area in which RPAC dollars are being effective in creating significant consensus behind bills which are focused on financial education, modifying repayment plans and consumer advocacy.
REALTORS can make a difference in advocating for their clients in leasing and purchasing homes. Recognizing that the purchase process often starts as a lease, we can advocate for clients who are fighting for the opportunity to enter into leases in an increasingly tight market by showing potential landlords that student debt does not necessarily make an individual a poor credit risk. In fact, it can show a commitment to do whatever is needed to ensure that long term goals are achieved.