One of the most common reasons preventing young Americans from owning a home is student loans. This is not necessarily a bad thing, on the contrary, it’s good to know the millennials know their priorities. Recent studies show that having a bachelor’s degree actually brings up the chance of a person becoming a homeowner.
In a recent Forbes article, the author explained that “in just the class of 2017, the average student has about $40,000 in debt – almost enough for a 20% down payment on a median-priced home.”
The Federal Reserve set out to determine exactly how much impact student loan debt has had on the homeownership rate of those 18-34 (millennials). Their results found that,
“Every $1,000 in student loan debt delays homeownership by about 2.5 months, but it doesn’t prevent homeownership entirely.
In fact, by the time college grads reach their 30s, those with student loan debt have a homeownership rate nearly identical to those who didn’t take out loans.” (emphasis added)
In the Wall Street Journal’s coverage of the Fed report, they found that recent graduates prioritize paying off their student loans over saving for a down payment, despite their desire to be a homeowner. Many with debt want to “get that monkey off (their) back (before they) make any new investments.”
This has just delayed the wave of young home buyers from hitting the market. But as Danielle Hale, the Chief Economist at realtor.com warns,
“2020 will be peak millennial, the year when the largest number of millennials will turn 30.”
By age 30, those who attained a bachelor’s degree right after high school will be one or two years away from paying off their loans and will have been in their career long enough to earn a higher salary.
In the long run, research shows that attaining a bachelor’s degree or more actually increases the chances that someone will become a homeowner.
If you are one of the many millennials who has prioritized paying down your student loans over saving for a down payment, you’re not alone. Even if you are a couple years away from paying off your loans, meet with a local real estate professional who can help you determine if waiting really is the best decision for you!