The Biggest Thing Keeping Young Homebuyers out of the Market Isn't Student Debt

College-educated couples are buying homes, regardless of how much they owe.

Millennials with a real estate agent, house-hunting.

Millennials with a real estate agent, house-hunting.

Photographer: Getty Images

Conventional wisdom has it that the staggering student debt incurred by the current generation of young professionals has made it harder to save for a home—and deprived the U.S. housing market of the first-time buyer lifeblood it depends on. But not so fast.

A blog post published by Zillow today shows that student-loan debt has little impact on the homebuying prospects of young families.

This is not the first report to poke holes in the student-debt-holding-back-home-ownership theory, but Zillow's research makes its point by limiting the data to married couples in their early-30s with at least one child. The idea was to cut out the student debtors who don't own homes because they haven't yet started a family and attempt to isolate the effect of student debt on home ownership.

How much does a family's student debt load affected their likelihood of owning home? It turns out, not much. Seventy percent of college graduates with just a bachelor's degree and zero student debt owned homes. Saddle that grad with $50,000 worth of college loans, and his or her chances of owning a house dropped only to 66 percent. The same pattern held true for households in which at least one parent has a master's or a doctorate.

Student debt, as the chart above shows, had a much bigger impact on the homebuying aspirations of people with just an associate's degree. The people least likely to own a home, however, are the ones with a chunk of debt and no degree. It seems that the worst thing a young person can do is borrow money to go to college and never finish.

The most obvious reason college-educated couples keep buying homes even while carrying student debt is that their degrees lead to good-paying jobs and are a good indicator of the kind of financial sophistication that helps people navigate the homebuying process. Another theory: "We're hearing anecdotally that there are many opportunities and tools that will help you lower monthly student loan payments," says Skylar Olsen, a senior economist at Zillow. High rents, she adds, are likely a bigger impediment to saving for a down payment than student loans.  

It bears noting that Zillow was seeking only to measure the impact that student debt has on would-be homebuyers who have already started families. Another favorite explanation for the slow return of first-time homebuyers to the U.S. housing market is that millennials are starting families later than previous generations. Whether that's because of cultural preference or economic imperative brought on by slow wage growth, high rents, or indeed, the need to pay down student debt is a thornier question.


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