Twenty-somethings are not borrowing money to buy homes at the rate they were a decade ago—a trend that may have as much to do with high levels of student debt and poor job prospects as it has to do with trauma from the housing bust, according to new research and analysis discussed at the recent National Association of Real Estate Editors (NAREE) conference.
Dennis Carlson, deputy chief economist at Equifax, spoke on a panel “Mortgage Availability for Millennials and Other First-Time Buyers.” Among key findings he will share: In 2004, consumers under the age of 30 in the United States had $146 billion in student loan debt, a number that had more than doubled to more than $369 billion by 2014.
Equifax data shows a high correlation between income and student loan delinquency rates. Those earning less than $30,000 are at the highest risk for delinquency. The delinquency rate is reduced by 20 percent with each additional of income, a phenomenon that demonstrates the strain student debt puts on young consumers starting their careers.
While steady employment helps, Equifax data also indicate that young workers struggle to make timely payments on their student loans even as late as four years into a job, where older workers see improvement in payment performance.
While mortgage debt fell among twenty-somethings both with and without student debt, it fell at a faster clip among those with student loans, according to data from Equifax and the Federal Reserve Bank of New York. In 2006, 33.2 percent of consumers under 30 with student debt had mortgage debt. By 2014, the number fell to 20.9 percent. In 2006, 29.6 percent of consumers without student debt had mortgage debt. By 2014, the number fell to 21.7 percent.
When renters were asked why they did not purchase a home, the No. 1 answer was “too much debt/not saved enough.” More than half of respondents—55.7 percent—gave that response in the Federal Reserve Bank of New York Survey of Consumer Expectations. Only 7.9 percent says they were concerned housing prices would fall.
“Equifax data suggests that the conventional theory—millennials are the rental generation and uninterested in home ownership—is only a part of the story,” Carlson says. “Importantly, large amounts of student debt and less than stellar job prospects for recent college graduates make the dream of home ownership shine less brightly than in the past. But we also see indications that they will eventually want the family, the car, and the house that older generations desired, just with a significant delay.”
For more information, visit www.equifax.com.