Student-loan debt continues to be a major obstacle along the path to home ownership across the nation, particularly for millennials. But it’s not the only one.
Other factors – such as the desire among younger people to switch jobs more frequently and their tendency to value experiences over material possessions – are causing many millennials to delay home ownership. Added to mix is the fact that many younger people are getting married later and waiting to settle down and start families, one of the prime reasons people buy homes.
Still, student-loan debt is the dominant factor in delaying home ownership.
Two years ago, the National Association of Realtors completed a study on millennials that showed 22 percent had delayed moving out of their parents’ houses specifically because of student loan debt, said Carl Billera, president of the Greater Lehigh Valley Realtors.
“That’s the big factor,” Billera said, noting that many young people struggle with saving enough for a down payment. Millennials are those born between 1981 and 1996.
In addition, many lack confidence in the economy based on their memories of the Great Recession. The economy may have been growing for a decade, with jobs plentiful, but young people remain uncertain.
“They aren’t sure about it because they aren’t used to it,” he said.
Despite the burden of student loan debt, some say there are solutions that can help millennials enter the housing market.
If interested buyers do the research, make their loan payments on time, and establish a plan with a lender ahead of time, they could potentially get pre-approved for a mortgage, said Korbin Price, 28, a Realtor at Coldwell Banker Hearthside Realtors of Hanover Township, Lehigh County.
Price said he has helped people buy homes even with student loan debt of up to $500,000.
“They don’t always have to view this as a major obstacle,” said Price, who has student loans himself but was pre-approved for a mortgage. “It’s a lot more attainable than people think.”
With low inventory and rising prices in the housing market, timing is critical, which is why it pays to have a plan ahead of time, Price added.
Price said he believes in the idea of home ownership as part of the American Dream and one that millennials are interested in obtaining even as they seek out experiences.
“I wouldn’t say it’s 100 percent student debt that’s causing it,” added Stephen Perun, a commercial lender for Peoples Security Bank & Trust in Bethlehem Township. “A lot of people in their 20s are valuing experiences and not material things.”
Perun, 33, said he owns a house and he has many friends who own houses, but acknowledged it’s a big financial commitment with a lot of uncertainty. Many people switch jobs more quickly, too, he added, which makes them tend to avoid buying a house.
Expectations about that house also may play a role, said Meghan Godorov, regional director for educational insights for the National Student Clearinghouse, a research firm in Virginia.
Many millennials want land and space, she said but they may not want to buy a starter house and would rather buy their dream house.
“In order to afford these bigger houses, they are waiting to have a family,” Godorov said.
Godorov, 35, works remotely from part of a house she rents in Orefield. She has been looking to buy a home over the past year or so but said there are not a lot of opportunities and many homes are either too large or too expensive.
Still, she said, “I definitely feel that putting my money into something that will create equity is valuable.”
While it may appear that millennials are delaying home ownership, others see more interest in people from that age group buying homes for the first time.
“We’ve actually seen an increase in first-time homebuyers coming into the market now,” said Jonathan Campbell, vice president of Realty at DLP Realty in Hanover Township, Northampton County.
Although student debt is an issue, interest rates keep going down, Campbell said. The average rate for a fixed 30-year mortgage is about 3.5 percent, he added.
“At the same time, rents are ever increasing,” Campbell said.
In addition, there are many programs for new homebuyers, including seller assist, federal grant programs and government backed loans. Furthermore, most people do not realize how little money they need for a down payment, he said.
Over the last few years, DLP Realty has seen 35 percent of its transactions for first time homebuyers increasing to about 45 percent.
“We’ve seen the biggest increase this year,” Campbell said.
Millennials are buying houses because they are realizing they can get into a home because their monthly payment is lower and there’s not as much cash coming out of their own pocket, he added.