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New Housing Opportunities For Young Adults with Student Loan Debt

Photo via GVH Live

Today, the main obstacle for young adults trying to become homeowners is the burden of student loan debt. At the 2016 REALTORS Legislative Meeting and Trade Expo, US Housing and Urban Development Secretary Julian Castro discussed the impact of student loan debt on potential young homeowners.

During his remarks, he announced some of the regulatory changes to ensure housing opportunities for young people repaying their student loans. “The prescription to the American Dream has always been working hard, saving money and investing in yourself, often by getting a great education. What has changed in recent times is that the third step – getting a great education is more expensive than ever.”

Castro reported that the HUD is working with its partners across the housing administration community to find new changes that will help more Americans purchase a home. Last November, the Federal Housing Administration announced changes to condo rules that would address a lengthy and complex recertification process, owner-occupancy requirements and limits on the types of property insurance that FHA considers acceptable coverage.

This is a long-fought win for realtors who are eager to see it come to fruition. Condos are an important option for buyers, especially first-timers looking for affordable options.

In addition to affordability issues, inventory shortages and lifestyle factors – such as marrying later and repaying student loans – are burdening a significant amount of credit-worthy buyers because it is more difficult to save for a down payment. The Education Department is working to address student loan debt as well by considering income-based repayment options and holding student loan servicers more accountable during the repayment process.

Data from the New York Fed demonstrates the extent to which student debt has defied the current business cycle. Non-mortgage debt balances – from auto loans and credit cars   had a period of decline during the immediate aftermath of the Great Recession and have now either flat lined or rebounded slowly in recent years. The exception to this has been student debt balances, which have skyrocketed from around $300 billion at the end of 2004 to $1.2 trillion today.

An NAR survey of homebuyers and renters indicates that millennial do make up the largest share of buyers among all generations. Over 90% of the millennial renters indicated the desire to become a homeowner in the future. However, student debt is delaying homeownership for most by around five years.

Do you have questions about how you can afford a home? Connect with one of our agents today.