Is Your Student Loan Debt Killing The Housing Market Recovery In The US?

According to recent reports, the millenials already have to deal with huge amounts of education debt that they carried from college, a shaky job market and growing up during a time when MTV no longer plays good music videos. But the sad part is that they’re being blamed for holding back the real estate boom. Home builder adviser, John Burns Consulting, published details from a study concluding that the soaring delinquent student loan payments will cost the housing industry 414,000 transactions in 2014 that would have totalled $85 billion in sales.

Is the ivory tower crumbling at the foundation?

It has been widely assumed by the financial analysts and the experts that the mounting student loan debt is eating away the otherwise buoyant housing market recovery. There have been reports of a large number of student loan borrowers who are not making their payments and they’re trying to quantify the impact of this debacle. But how did this adviser arrive at this huge number of $83 billion?

Well, to start off with, there are 5.9 million households under the age of 40 that are paying at least $250-300 in student loan debt, nearly triple the amount that was surveyed in the year 2005. We, then arrive to the assumption that $250 earmarked for student loan debt every month will certainly reduce the buying power of a prospective home buyer by $45,000. That’s actually bad and this is what is naturally dampening their urge to buy homes and help the housing market to recover. In fact, there is even more than $250 that these students have taken on to pay back.

Statistics get worse

The above mentioned study only looked at the borrowers between the ages of 20-40. That is a pretty sizeable lot, especially since 35% of all the households in this age group have at least $250 in student loan debt. However, John Burns Consulting concludes that there is yet another big chunk of households over the age of 40 who have student loan debt as well. They might not be likely at such a bad situation, but it is incremental at this point.

This report comes at a time when the housing industry is gradually flinching after a few years of boom and bounce. Right now, almost everything seems to be great as new homes sales data released showed that the industry’s highest monthly growth rate in more than 6 years. However, the near term outlook is gradually starting to get hazy.

The student debt crisis – Will it get better?

The student debt crisis is real and the spiralling costs of obtaining a post-secondary education naturally opens up the debate for the necessity of this kind of requirement. However, it is also vital to remember that the university grads earn far better than those who attend college. As there are a large number of students who go to attend graduate schools and skip their university education, this becomes one of the strongest reasons for piling up student loan debt.

In other words, most university grads are in a better off situation than those who didn’t pursue higher education, even with the student loan albatross. The housing industry would fare well if the student loan debt levels were lower and the colleges were cheaper.

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