With the average college graduate owing over $28,000 in tuition debt, many renters today believe their financial circumstances are preventing them from achieving homeownership, according to the results of a new poll.
Among individuals who are current with their tuition obligations, approximately three-quarters indicate that the expense is making it harder for them to buy a home, a new poll from the National Association of Realtors found. With millennials representing the generation that's nearest to the typical college age, close to 80 percent of 26- to 35-year-olds felt paying student debt off was delaying their opportunity. However, even for those who are older and still owe money, more than half testified to debt being a homeownership hurdle.
According to the Institute for College Access & Success, approximately 70 percent of graduating seniors in 2014 had at least $28,950 left to pay for their student loans. Among respondents, 38 percent owed at least $50,000.
NAR Chief Economist Lawrence Yun indicated that with Americans today having a litany of expenses, tuition debt is just one more thing that's complicating matters for those with homeownership aspirations.
"Along with rent, a car payment and other large monthly expenses that can squeeze a household's budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase," Yun explained.
52 percent say they won't be buying for five years
As to when non-homeowners will have the means to buy a house, a majority forecasted it being at least five years from now, the poll revealed, with 20 percent believing it would take one to three years.
Complicating matters further is the price of for-sale properties. According to government statistics compiled by The Wall Street Journal, 19 percent of new homes purchased last year were for $200,000 or less. Four years ago, nearly 40 percent of homes sold was at or under this threshold.
Starter homes have increasingly dried up in today's residential real estate climate, falling by a nationwide average of 9 percent on a year-over-year basis, according to analysis conducted by home listings firm Zillow. In some markets, availability for entry-level homes have slipped by double-digits. Meanwhile, existing-home prices continue to climb, with the median sales price currently at $239,700, according to a separate NAR report.
Svenja Gudell, Ph.D., Zillow's chief economist, said the starter home crunch has led to bidding wars, driving the price of ownership up even further.
Mortgage rates tumble to low point of 2016
Something would-be homeowners have working in their favor are mortgage rates, which are at historical lows. In Freddie Mac's most recent Primary Mortgage Market Survey, 30-year fixed-rate loans averaged 3.4 percent for the last full week of June. Down to its lowest ebb on the year, 30-year FRMs are only a few basis points shy of reaching record-level territory.
Back in the 1970s, interest rates hovered in the 20 percent range for a prolonged period, creating potential financing issues that prevented some people from even applying for a mortgage. Even in the late 1990s, mortgages for prime borrowers were as high as 8 percent.
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