Imagine this familiar scenario that so many Millennials face: they spend four years in college working hard to attain the grades they’ll need to get profitable employment once their schooling is complete, but at the same time, they are amassing thousands upon thousands of dollars’ worth of student loan debt. Once they take that congratulatory walk across the graduation stage, rather than entering the world feeling like they are ready to settle down and find a home they can call their own, the sad reality sets in. They realize that is not going to happen—at least not the way it did for their parents and previous generations.
According to a survey conducted by the National Association of Realtors (NAR) and SALT, a consumer literacy program, 71 percent of non-homeowners who are repaying student debt believe this is preventing them from buying a house. Also, more than 50 percent of borrowers don’t expect to be able to purchase a home for the next five years.
It’s no surprise that a large number of college graduates will be struggling to pay off student loans for many years. For real estate investors and others looking to sell their properties, these survey findings are definitely cause for concern, as a traditional source of buyers no longer sees purchasing a home as top priority.
Some delay is to be expected as college graduates transition from dorm life to finding a “real-world” place to live, whether that means buying a home or renting. But for more and more of them, that time is stretching beyond normal limits. In the NAR survey, almost half of Millennials polled said they still live with family.
This phenomenon goes back even further than just the current wave of graduates. The NAR study also found that 33 percent of older Millennials (ages 26-35) who graduated six to 10 years ago had a delay of more than two years before they were able to move out of their family’s homes. NAR chief economist Lawrence Yun sums up how this is influencing the housing market overall: “Add in the detrimental effects of low inventory as well as rents and home price growth outpacing wages, and it’s mainly why the share of first-time buyers remains at its lowest point in nearly three decades.”
As with most everything in the real estate business, it is a numbers game. And the numbers in this situation just don’t lie. Even those non-homeowners earning more than $50,000 a year say they still can’t save for the down payment, according to the NAR study. When you consider extra expenses such as car payments, credit card bills and rent on top of a monthly student loan bill, it is no wonder Millennials are unable to save the 10 percent to 20 percent needed for the down payment on a house.
Real estate investors would be well advised to study the NAR findings and reports from other industry watchers, as they provide important insight on market trends. With Millennials currently veering away from home buying, the rental market is experiencing an upswing. Therefore, choosing to invest in long-term buy-and-hold rental properties may be a wise option in order to capitalize on this growing market of post-graduate renters.
About the Author
Erica Hackmyer is the content writer for LendingOne, a direct private real estate lender that offers short-term loans for non-owner-occupied residential properties, specifically regarding fix-and-flip, buy-and-hold and lines of credit to fund larger projects. With direct access to its own capital, exceptional customer service and a user-friendly online application, LendingOne has streamlined the overall lending process and made it faster and easier for investors to be approved and receive their financing in as little as 10 business days. For more information, visit www.lendingone.com or call 866-412-1574. You can also visit https://calendly.com/lendingone to set up an appointment to speak with a LendingOne loan specialist.