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TH E M R EP O RT | 51 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Higher Education Costs vs. Home Purchase Power Data suggests student loan debt is not an insurmountable barrier to homeownership for millennials. A ccording to many re- ports, student loan debt is a significant hurdle for millennials when buying a home. But numbers from the First American Econom- ic Center challenges that supposi- tion, suggesting that student loan debt is likely to delay the timing of homeownership, but it's not necessarily a deal-breaker. To examine the impact of student loan debt on house-buying power, the report looked into the median household income of a prospective first-time home buyer, who is, by definition, a renter. A renter's house-buying power is based on "the prevailing 30-year, fixed mortgage rate (4.64 percent in January), and assumes a 5 percent down payment and that one-third of pre-tax income is used for the mortgage," the report states. The average student loan debt for those that complete their bachelor's degree is approximately $30,000. Based on a 6 percent Federal direct student loan interest rate, the aver- age monthly payment is just above $300 per month, or nearly $4,000 per year. The report pointed out that this reduces median household income for those that complete their bachelor's degree and, there- fore, reduces house-buying power by $23,000 to $323,603. While the reduction in house-buying power is not ideal, renter house-buying power for those with a bachelor's degree is still more than $120,000 greater than renters with just a high school education. So, how does higher house- buying power influence home buying? Quoting the latest avail- able household census data in 2017, First American stated that homeownership rates for those with a bachelor's degree are near- ly 8 percent higher than those with a high school degree. This difference becomes more exagger- ated when comparing those with a college degree to those who do not complete high school—nearly a 25 percent difference in home- ownership rates. Education pays off when it comes to homebuying power. Nine out of 10 millennials say their college education was worthwhile and have already paid off their debt or will in the future. Student-debt adds up, but higher education leads to higher income wherein the increase in income attributable to higher edu- cation far outweighs the impact of student loan debt. Although the price of college is high, not going to college may cost more in the long run.