What is holding first time home buyers back from achieving their dreams of home ownership?  Mortgage interest rates are still amazingly low which means buyers purchasing power is up. However, Bloomberg News has reported that the age of first time home buyers is gradually increasing. Instead of purchasing your first home at 25, the median age of a first time home buyer across the United States is 33 years old*. In California, we might scoff at 33 years old because in certain metropolitan areas like Los Angeles and San Francisco that seems on the young side.

If you asked the typical college-educated 25-35 year old with a steady job who is currently renting, why they have not purchased a home yet, what do you think their answer would be?

Our guess: student debt.

The National Association of Realtors found that almost 4 out of 5 non-homeowners polled said that student debt was delaying them buying a house.**


The National Association of Realtors took a look at the Student Loan Debt and housing market connection a couple years ago. Although this is coming from a 2017 survey, we are still in the same quagmire. The median student loan debt is approximately $41,200 and 17 percent (that is almost one in five) have a debt of more than $100,000. How did this happen? If you look at the cost of public and private universities annual tuition, multiply that by four years of school without any grants or scholarships, and now you can see that one hundred grand isn’t too hard of a number to hit.


To put that into perspective, $100,000 is equivalent to a 20 percent down payment on a $500,000 house. $40,000 is equivalent to 20 percent down on a $200,000 house or 10 percent down on a $400,000 home. 

For many young people, they already feel like they have a mortgage: but for them, it isn’t on a property, it is the loan payments on their college education.

As a real estate brokerage, we can help in a variety of ways:


 

1. Education –

You don’t always have to put twenty percent down. There are down payment assistance programs and loan programs out there that work for young adults with student debt


2. Sharing Success Stories –

For a young person with student debt, sometimes they need to hear that someone else has done it before them. When you can get a mortgage for roughly the same as your monthly rent, then you start to feel like it is possible for you to own


3. Solutions –

For some first time home buyers, the purchase is a little less traditional. Is it purchasing with a parent as a co-signer? Is it buying a home and having a grandparent live with you? Is it co-buying with a significant other or friend? I have heard of different creative solutions to making that first home purchase happen.


Student loan is delaying young people from becoming first time home buyers. The delay is often 7 years. Seven years of paying rent and not your own mortgage. 

Call us today — we are happy to talk to you, your son/daughter, your friend, or anyone who wants to buy their first home in 2020. 
 

Sources: 
**National Association of Realtors

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.