Student Loans Could Cost the Housing Market $83 Billion This Year
September 23, 2014

According to a new report from John Burns Consulting, approximately 414,000 home sales will not happen this year because of student debt repayments. This comes out to around 8% of all home sales in America, curbing the housing market by $83 billion.

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Rick Palacios, director of research at John Burns Consulting, said, “If you’ve got a huge chunk of student debt, then you obviously can’t allocate to saving. You’re sacrificing purchasing power for certain things, and one of those things is housing.”

To come up with that figure, the consulting firm assessed the number of households under the age of 40 that owe $250 or more each month in student loan payments. The report says this number has tripled since 2005, from 2.2 million to 5.9 million. The $250 monthly student loan payments reduce home-buying power by $44,000, on average. Assuming that the average sale price of a home is $200,000, the result of all of this is $83 billion in sales.

Palacios said, “We actually think it’s pretty conservative. We’re only looking at people age 20 to 40. We know there’s a big chunk of households over age 40 who have student debt, too.”

With all of this in mind, many industry experts say that the research is too one-sided. There are a variety of other factors that may cause young people not to buy homes, either with student loan debt or otherwise. Jed Kolko, chief economist at Trulia, said, “If the people who are struggling most under student loan debt are also people who spent many years being unemployed, or saw their income suffer in the first place, it may not be the student loan debt that’s having the impact.”

The case remains open about how much student loan debt has impacted the housing market, but all trends point to a decline in home-buying among young adults. Mortgage lenders, sellers, buyers, and realtors alike will have to come together for those numbers to rise once again.