Education Thwarting Homeownership for Younger Households
Written by Phoebe Chongchua
Was it worth it? That may be the question being asked by about 5.9 million households between the ages of 20 to 40 who incurred student college loan debt and are still paying it down today to the tune of about $250 or more each month.
A new study reveals the impact of student college loan debt on the housing market. According to the report by John Burns Consulting, an Irvine, California-based firm, 414,000 homes sales won’t happen because of high levels of student debt and the monthly-payback burden.
This, says the report, amounts to 8 percent of all sales and will economically hurt the housing industry by an estimated $83 billion a year. The study also reports that the hundreds of dollars paid toward student debt monthly causes the purchasing power of the hopeful borrowers to drop by $44,000.
In an interesting twist from the normal trend, college grads (with perhaps higher salaries) are not embracing homeownership whereas those who never went to college might be inclined to seek homeownership.
The under-age-40 group as a whole is less likely to have a mortgage if they have student loans. But in that same age group, if they never went to college, owning a home is more likely than those who are strapped by having to still make college loan repayments.
Another reason, this group might not be as eager to take on a mortgage is because many of them want to live and work and be rewarded with experiences rather than with materialistic things.
However, buying a home at a younger age can prove to be very beneficial. There are a number of reasons why. Let’s explore some.
Homeownership provides you with not only a place to live but a place to rent out for income if you choose to move. It creates an opportunity for you to gain equity while your renters help pay down your mortgage. This allows you to travel and still experience life, provided you don’t overpay for your home and you put down a healthy downpayment.
Homeownership gives you the opportunity to make the changes you want to your home. It’s a space of your own and, yes, that also means that you won’t be calling the landlord to fix the washer. But if you plan wisely and have a reserve maintenance interest-earning account that you contribute to each month, you’ll likely find that your repairs won’t deplete it each year; depending on how much you contribute. Also, be sure to get a home inspection so that you know exactly what the condition of the home is that you’re purchasing.
Right now, we’re still experiencing good low interest rates and many areas have affordable homes. These two factors are critical and highly appealing as they make getting into homeownership easier.
If you’re planning to stay put in a home for several years, homeownership may be the best way to go as you will be building equity as opposed to simply renting and paying down someone else’s mortgage.
But, of course, with that student loan debt, you may find it a bit harder to break into the housing market. So scrimp a little to save, work to earn more, and keep your eye on the housing market so that you can someday be a homeowner, if that’s the path for you.
Check out the link for the interactive article!