It would take about seven years before an overwhelming majority of millennials could buy their own homes and its mainly due to student debt, a recent study revealed.
According to the joint study conducted by the US National Association of Realtors and nonprofit American Student Assistance, student debt is holding back millennials from financial decisions and personal milestones such as adequately saving for retirement, changing careers, continuing their education, marrying and having children.
The new study found that only 20 percent of the 2,203 millennial respondents currently own a home and that they are typically carrying a student debt load (US$41,200) that surpasses their annual income (US$38,800).
Most respondents, or 79 percent, borrowed money to finance their education at a four-year college, and slightly over half, or 51 percent, are repaying a balance of over US$40,000.
Of the 80 percent of those who said they do not own a home, 83 percent believe their student loan debt has affected their ability to buy. The study revealed the median amount of time these millennials expect to be delayed from buying a home is seven years, and overall, 84 percent expect to postpone buying by at least three years.
“The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing millennials’ housing choices and other major life decisions,” Lawrence Yun, NAR chief economist, said in a statement.
“Sales to first-time buyers have been underwhelming for several years now, and this survey indicates student debt is a big part of the blame. Even a large majority of older millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”
Yun said the housing market’s lifecycle is being disrupted by the US$1.4 trillion of student debt US households are currently carrying.
A quarter of current millennial homeowners said their student debt is preventing them from selling their home to buy a new one, either because it’s too expensive to move and upgrade, or because their loans have impacted their credit for a future mortgage.
“Millennial homeowners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,” Yun added.