How college can ruin your chances of buying a house
Total US student loan debt has topped $1.3 trillion, nearly triple what it was a decade ago, with a rate of serious delinquency (at least 90 days late) that surpasses any other type of debt, according to the Federal Reserve Bank of New York.
On Thursday, Fannie Mae (FNMA) released a national housing surveyĀ with a troubling finding for some student debtors:Ā People with high school degrees who never went to college have a better shot of owning homesĀ than ones who took on debt to go to college but never ended up graduating.
In fact, college dropouts with some debt are 32% less likely to be homeowners than high school grads.Ā āIf you take the debt but donāt get the degree thatās a problem,ā Doug Duncan, Fannie Maeās chief economist, told Yahoo Finance.
However, student debtors who finished college often fare better at homeownership than those without a college diploma. In fact, student debtors with aĀ bachelorās degree are 27% more likely to be homeowners than those who didnāt attend college and therefore have no student loans.
While student loan debt doesnāt ruin chances of homeownership for college grads, it may delayĀ the timeline for a first home purchase. Student loans arenāt the only factors that can delay homeownership, though.
With homeownership at 63% today (compared to 69% a decade ago), there is a broader trend in the housing market ā many people are simply buying homes later on in life. Duncan says two key factors contribute to this shift: weak income growth and lack of affordable properties.
Americans are struggling to accumulate the income necessary to be able to afford a home, according to Duncan. Additionally, construction in the housing sector has had a slow rebound. The prices of single-family entry-level homes ā to the extent they exist ā have been increasing the fastest of any group.
āThe biggest inhibitor today is simply the lack of entry-level housing so that the 90%+ of millennials who eventually want to become homeowners [can do so],ā Duncan says. āThere needs to be some expansion on the supply side for them to be affordable.ā
Moreover, rentals being built are higher cost properties, which means people are paying steep rental prices. Higher rents, Duncan points out,Ā inevitably slow the pace at which people can actually accumulate savings to buy a house of their own.
Melody Hahm is a reporter at Yahoo Finance. Read more fromĀ her:
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