The answer is…complicated. It’s true that millennials (defined by the Merriam-Webster dictionary as those born in the 1980s and 1990s) have a large amount of student loan debt. Citing data collected by the Federal Reserve Bank of New York, a 2014 CNN Money article revealed that the American student loan debt balance has risen to 1.1 trillion dollars, with the debt for a graduate under 30 averaging $21,000.
What affect will this debt have on millennials' ability to purchase a home? Rick Palacios, the director of research for John Burns Real Estate Consulting, estimates that every $250 paid by households each month toward student loan debt reduces their home purchasing power by $44,000.
But it’s not all bad news. Research shows that college graduates consistently earn more than those who did not receive a college degree. According to a recent article in USA Today, the median annual earnings for young adults in 2012 was $59,600 for those with an advanced degree, $46,900 for those with a bachelor's degree, $30,000 for those with a high school degree or credential and $22,900 for those who did not complete high school. Higher income equates to higher purchasing power, putting homeownership within reach for many millennials with college degrees.
And, according to an article posted last week in the Las Vegas Review Journal, millennials actually want to become homeowners. Citing a survey conducted by Zillow, the article argues that millennials believe more strongly than previous generations that owning a home is “necessary to being a respected member of society, living a good life and obtaining the American dream.” Furthermore, while many millennials have delayed both marriage and homeownership until they are more financially stable, the Zillow survey also found that married millennials with two incomes are actually slightly more likely to own homes than generations before them. For more information about Zillow, please visit: http://www.zillow.com.
With new federal changes aimed at younger, entry-level home buyers (the topic of last week’s blog post), homeownership could become a reality for more millennials. TSAHC recommends that anyone wishing to purchase a home (but worried about student loans or other debt) contact a nonprofit housing counselor to help them create a plan towards homeownership. Click here to access the Texas Financial Toolbox to find a counselor in your area.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.