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October 2017

Millennials delaying homeownership, citing student debt

Millennial Student Debt infographicStudent debt is blamed for decisions by millennials to delay buying a home and to postpone other financial decisions and life choices.

A joint study by the National Association of Realtors® and nonprofit American Student Assistance® revealed the median amount of time millennials expect to be delayed from purchasing a home is seven years; overall, 84 percent expect to postpone buying by at least three years. The new study found that only 20 percent of millennial respondents currently own a home.

This cohort (generally those born in the 1980s or 1990s) also told researchers that student debt is causing them to hold back on other important personal milestones, such as adequately saving for retirement, changing careers, continuing the education, marrying, and having children.

Lawrence Yun, NAR chief economist, said the housing market's lifecycle is being disrupted by the $1.4 trillion of student debt currently being carried by U.S. households.

"The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that's influencing millennials' housing choices and other major life decisions," said Lawrence Yun, NAR chief economist. "Sales to first-time buyers have been underwhelming for several years now, and this survey indicates student debt is a big part of the blame. Even a large majority of older millennials and those with higher incomes say they're being forced to delay homeownership because they can't save for a down payment and don't feel financially secure enough to buy."

Yun expressed particular concern for millennials' decision to postpone saving for retirement because of their student debt. A large segment (60 percent) told researchers there were times when they were not able to make a contribution to their retirement. Nearly a third (32 percent) said at times they were able to contribute but with a reduced amount.

"Being unable to adequately save for retirement on top of not experiencing the wealth building benefits of owning a home is an unfortunate situation that could have long-term consequences to the financial well-being of these millennials," said Yun. "A scenario where only those with minimal or no student debt can afford to buy a home and save for retirement is not an ideal situation and is one that weakens the economy and contributes to widening inequality."

Survey findings underscore a need for better understanding of college costs, according to NAR and ASA.  Only one-in-five borrowers indicated in the survey that they understood all of the costs, including tuition, fees and housing.

Most respondents borrowed money to finance their education at a four-year college (79 percent), and slightly over half (51 percent) are repaying a balance of over $40,000.

"Student debt is a reality for the majority of students attending colleges and universities across our country. We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership," said Jean Eddy, president and CEO at ASA. "The results of this study reinforce the need for solutions that both reduce education debt levels for future students, and enable current borrowers to make that debt manageable so they don't have to put the rest of their financial goals on hold."

"Realtors® are actively working with consumers and policy leaders to address the growing burden student debt is having on homeownership," President William E. Brown, a Realtor® from Alamo, California. "We support efforts that promote education and simplify the student borrowing process, as well as underwriting measures that make it easier for homebuyers carrying student loan debt to qualify for a mortgage."