Student debt holds back many would-be home buyers

Of the many factors holding back young home buyers — rising prices, tougher lending standards, a still-shaky job market — none looms larger than the recent explosion of college debt.

By Tim Logan

April 19, 2014, 6:33 p.m.

The amount owed on student loans has tripled in a decade, to nearly $1.1 trillion, according to the Federal Reserve Bank of New York. People in their 20s and 30s — often the best-educated and highest-earning among them — owe most of that tab. That is keeping a crucial segment of home buyers on the sidelines, deferring one of the traditional markers of adult success. 

The National Assn. of Realtors recently identified student debt as a key factor in soft demand for home-buying this spring. A recent study by the trade group identified student loans as the top reason many home buyers delayed their purchase. Many more didn't buy at all.

The share of buyers who are first-timers has dropped well below historical averages — 28% of California buyers last year, compared with 38% typically, according to CAR surveys. The absence of a new generation of customers could become a long-term problem for the industry, said Dustin Hobbs, spokesman for the California Mortgage Bankers Assn. 

"You have to have that swath of first-time buyers who will eventually be your move-up buyers," he said. "When you take that out, it damages the whole chain."

Dead-Cat Bounce Over for the Housing Market?

April 23rd, 2014

by Michael Lombardi

I have been saying this for a while: You can't have a housing recovery unless actual home buyers are involved. 

The bottom line with the housing market is that its rebound over the past couple of years has been sustained by institutional investors who have invested billions in buying homes at "cheap" prices, fixing them up, and then renting them for a return on investment. Actual participation by people who buy the homes to live in them -- especially first-time home buyers -- is very weak, as evidenced by the collapse in mortgage originations at the big banks.

DYI Comments:  Looming deflation, student loans, normalization of interest rates, slow growth economy does not bode well for higher prices for single family housing. Institutional investors (acting more like speculators) who have stampeded into the rental business may find a huge difference between single family homes that are labor and repair intensive as compared to apartment complexes with identical units and four major walls.  I would not be surprise to see the hedge fund boys look to sell as soon as possible by packaging up the homes and sell them to some naive pension or foreign investors.

It is anticipated that the momentum will slow and a very possible further price retreat.  If you are planning on selling your home do so yesterday.  Lower prices are a very possible future for single family homes.

DYI