Today’s millennials are playing a waiting game when it comes to buying a home because they’re saddled with so much student loan debt.
Historically, Americans have bought a home by their early 30s, but today’s millennials are playing a waiting game because they’re saddled with so much student loan debt and can’t afford to save.
For first-time buyers, a majority of whom are millennials, the median down payment was 5% in 2017, down from 6% a year earlier, MarketWatch reportedbased on data released Monday by the National Association of Realtors. Comparatively, the median down payment among all home buyers was 10%.
Millennials who don’t already own homes are delaying purchasing one for a median of seven years, according to another recent joint study on millennial student debt from the National Association of Realtors and education financing nonprofit American Student Assistance.
Overall, 83% of non-home owners said they believe that student loan debt has delayed them from buying a home — and that figure is higher among older millennials (those born between 1980 and 1989) and people who have more than $70,000 in student loan debt. The report was based on the results of a survey of 2,203 student loan borrowers.
Most commonly, student debt is affecting people’s ability to save. Some 85% of respondents said they have not been able to save for a down payment because of their student loans. Additionally, nearly three-quarters of people said they’re putting off buying because their student debt makes them feel too financially insecure. More than half (52%) of respondents also said that they can’t qualify for a mortgage because of their debt-to-income ratio.
There’s a good chance though that debt-burdened millennials are over-estimating how much they need to save for a down payment. Most millennials said that the minimum required down payment is 21%, according to a recent survey from national nonprofit NeighborWorks America.
Today, the student debt load is $1.4 trillion — equivalent to 35% of all non-housing debt nationally. Four in 10 first-time home buyers have some student debt, while a similar share of student loan borrowers (42%) delayed a move out of a family member’s home after college.
Other research has shown that rising college costs and student debt may be causing a decline in homeownership. However, forgoing college isn’t necessarily a path to making homeownership easier — indeed, young people with college debt are actually more likely to own a home than those without loans.
But the student debt burden isn’t only causing millennials to put off buying their first homes — among millennials who already own homes, the median delay to purchase a second home is three years. More than one in five homeowners (21%) said that it was too expensive to move.
And student debt has an effect on myriad decisions unrelated to housing. Nearly two-thirds of respondents (61%) said they couldn’t afford to contribute to a retirement account at times because of their student loans, while 32% said they had to put in a reduced amount. Student debt also impacted the choice to take a vacation (72% of those surveyed), purchase a car (65%) and to continue with education (64%).