Student debt may hurt housing recovery by hampering first-time buyers

First-time buyers, the bedrock of the housing market, are not stepping up to fill the void. They have accounted for nearly a third of home purchases over the past year, well below the historical norm, industry figures show. The trend has alarmed some housing experts, who suspect that student loan debt is partly to blame. That debt has tripled from a decade earlier, to more than $1 trillion, while wages for young college graduates have dropped. 

The fear is that many young adults can no longer save for a down payment or qualify for a mortgage, impeding the housing market and the overall economy, which relies heavily on the housing sector for growth, regulators and mortgage industry experts said. 

“This is a huge issue for us,” said David H. Stevens, chief executive of the Mortgage Bankers Association. “Student debt trumps all other consumer debt. It’s going to have an extraordinary dampening effect on young peoples’ ability to borrow for a home, and that’s going to impact the housing market and the economy at large.”

DYI Comments:  It is no doubt that a portion of household formation is being hampered by the escalating cost of Universities.  The student loan program that was started with the best of intentions has now driven the increases in educational costs at a rate far faster than health care.  This of course is due to an ever increasing amount of educational loans pushing up all costs for a college degree.  When the piper has to be paid for most young people the student loan IS the house payment.  Until that is paid purchasing a house is out of the question.

DYI