How the Student Loan Burden Affects Home-Buying Trends
Friday Feb 28th, 2020
When entering into professional life, millennials expect that their starting salaries would cover their student loan payments. Well, that’s not how it goes. Unfortunately, statistics show that student loan debt is an elephant in the room which impacts the financial stability of many.
Student loan has a significant impact on how individuals make home-buying decisions. The average outstanding balance of $37,172 is preventing people from buying their preferred housing choices but nonetheless, the market trend shows that despite long wait and debt in hand, millennials are progressively entering the housing market.
Statistics About Millennial Student Debt
Student loan has doubled in the last decade and Americans are approximately paying $1.5 trillion. It is also claimed that these numbers could reach $2 trillion in the following six years.
According to recent studies, 61 percent of millennials have put off the idea of buying a new home due to student loan debt and other reasons. Student debt is also holding millennials from moving into a new city, getting married and starting a new family.
Millennials prefer to go for rent with roommates or moving back home instead of buying homes because they have to pay $400 each month to pay down their loans.
Do Student Loans Really Prevent Millennials From Buying A Home?
But surprisingly the student loans don’t necessarily stop millennial from buying a house. When a lender goes through a potential buyer’s application, he not only looks for how much they owe. He also compares the buyer’s recurring debt to their monthly income.
A student loan is not the only thing in consideration, credit card debt and car loan payments are also included when calculating the buyer’s DTI. A potential buyer is the one with 36 percent below DTI.
Although homeownership dropped 20 percent between 2005 and 2014, partially due to the student debt crisis, today it is observed that millennials have started purchasing their own properties in the past few years.
Buying a house as a millennial is possible as long as you are able to save and manage debt.
Millennial Home-Buying Trends
Millennials haven’t completely rejected the idea of purchasing a home. In fact, there is an increase in millennials buying home year by year.
In 2017, millennials made up 34 percent of the people buying homes. However, not every individual from this generation can do it right now.
With the combination of student loan debt, long wait, and the influence of technology – a lot has changed for millennials when it comes to buying a house. Here are some home-buying tips for millennials 2020 to help you have the ownership of a home.
- Buying Fixer-Uppers
- Settling for Smaller Homes
- Skimping on the down payment
- Heading to the Suburbs
- Getting Help from family
Long List of Must-Haves for Millennials
Although millennials are settling for living in suburbs or smaller homes, they have different priorities than baby boomers. Millennials tend to turn their not-so-luxurious houses into their dream homes with the following checklist.
- Compatible with home technology
- Space for a home office
- Able to get high-speed internet and excellent cell reception
- Updated kitchen and bathroom
With the evolution of the generation, millennials have their own ways to do things. Similarly, technology plays a major role in them when it comes to home buying. According to a 2017 report from the National Association of Realtors (NAR), 99% of millennials search online to get information about homes and home buying.
Millennials are dedicated to their devices and around twice as likely to use their mobile phones in their search as older baby boomers. With 58% of millennials finding the place they want to purchase through their tablets and smartphones. According to the NAR, it is affecting the way real estate agents and brokers approach their role in the buying process. DanieleSica.com is a platform that offers a full range of services for buying a home. So, if you are hoping to buy a home, you can entirely rely on our exceptional real estate services to get the house of your dreams.