A new report by the National Association of Realtors reveals that half of prospective homebuyers attribute their student loan debt as a reason for the delay in buying a home.
In partnership with Morning Consult, the NAR conducted an online poll surveying 1,995 student loan borrowers.
Millennials, comprising 60% of respondents, were the most likely to postpone homeownership due to student debt.
However, more than a third of baby boomers expressed the same sentiment. NAR President Charlie Oppler stated that housing affordability is deteriorating, putting those with student debt at a disadvantage.
The outstanding student loan debt in the United States now exceeds $1.7 trillion, surpassing credit card and auto debt. Delinquency or default affects approximately one-third of student loan borrowers.
The NAR’s findings highlight the significant impact of student debt on the ability to buy homes. The online poll provides valuable insights into the connection between student debt and homeownership postponement. Urgent attention is needed to address the burden of student debt and improve housing affordability.
Buying New Home Will Be Difficult
The typical American family earning $75,000 annually can only afford 23% of homes for sale.
Homeownership may be reconsidered due to the resumption of student-loan payments and rising expenses.
The National Association of Realtors suggests various solutions to address the student-loan debt burden. Employers could support student-debt relief programs with federal government assistance. Refinancing student debt into lower rates should be made available to borrowers.
Standardizing mortgage underwriting guidelines related to student loans is another proposed solution. Millennials have decreased as a share of buyers this year, impacting the housing market. First-time home buyers dropped to their lowest recorded share in 41 years.
Only 26% of home buyers are first-time buyers, down from 34% last year. Younger millennials make up 70% of first-time home buyers, while older millennials account for 46%.
Generation Xers represent 21% of first-time home buyers. Based on Zillow’s data, the typical home value increased by 1.4% in May. Zillow estimates the average home price in Houston to be around $265,733.
Houston’s average home price has risen by 1% over the past year. Many Americans face obstacles in achieving homeownership due to student-loan debt.
Rising Mortgage rates
Rising mortgage rates further exacerbate the impact of student debt on home buying. The National Association of Realtors highlights the need for urgent action. Homeownership is seen as a means to build wealth and achieve financial security. The share of first-time home buyers has declined significantly in recent years.
The housing market is experiencing a decline in the number of millennial buyers. Federal tax benefits could assist employers in sponsoring student-debt relief programs. Students burdened with loans need access to refinancing options with lower interest rates.
The NAR proposes standardizing guidelines to facilitate mortgage approval for those with student-loan debt. They also emphasize the importance of wealth building and financial security through owning a home.
The NAR reports a historical low for first-time buyers in over four decades. Houston’s housing market has seen a modest increase in average home prices. Rising expenses and student debt affect the ability of Americans to afford homes.
Action is necessary to address potential home buyers’ challenges in today’s market.
When will the payment resume
Payment freezes for federal student loans are set to end soon, with interest resuming on September 1 and payments becoming due in October, as stated on the Department of Education’s website.
While student-loan payments were on hold, borrowers took advantage of the opportunity to acquire additional auto loans, credit card debt, and mortgages. According to economists from the University of Chicago, this behavior had minimal impact on loan delinquencies.
Expert’s thought
Mike Pierce, executive director at the Student Borrower Protection Center, referred to the paper’s findings. According to Pierce, the paper indicates a clear correlation between debt relief and expanded homeownership.
Pierce argued that canceling student debt would build a stronger middle class. According to Pierce, failure to cancel student debt would exclude millions from wealth-building opportunities.
The promise of debt relief and the push for expanded homeownership are interconnected, as stated by Pierce.