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Student debt doesn’t explain housing trends

November 26th, 2015

The other common explanation for this big shift in American real estate is that young people have too much debt to buy homes, especially from student loans. But economists at Zillow took a look at the probability that someone would buy a home if they have zero debt all the way up to $50,000 in student loans. They found that higher student debt had almost no impact on the decision to buy a home.

Banks were very willing to lend to young people who had bachelor’s degree or higher, a recognition that these people would be likely to earn good salaries and pay off their loans. The one exception was people who earned only an associate’s degree. There was a 75% chance of buying a home if they had no student debt.

But that fell to less than 60% chance of purchasing property if they had $50,000 in loans. It’s an economic reality that workers with at least a bachelor’s degree now earn about $65,000 on average a year, compared to less than $50,000 a year for those with only an associate’s degree.

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