SEATTLE, Sept. 17, 2015 /PRNewswire/ -- Having a lot of
student debt doesn't greatly reduce young people's chances of
homeownership, as long as they graduate, a new analysis by Zillow
has found.i
The findings challenge a popular concern: that giant student
loan payments are holding back people from homeownership. As it
turns out, graduates' debt loads don't materially hurt their
chances of homeownership – especially if they get at least a
four-year degree.
"College students paying their tuition with borrowed money can
rest easy this fall in their dorm rooms: the income advantage of
getting a degree pays off in terms of being able to buy a home in
the long run," said Zillow Chief Economist Dr. Svenja Gudell. "Student debt isn't the evil-doer
it's made out to be, at least not when it comes to homeownership.
As long as students stay in school and get a degree, student debt
doesn't deter them from homeownership, although it is possible that
student debt could delay homeownership. People in their 20s
and 30s are renting longer because they're delaying marriage,
paying a lot in rent, and struggling to qualify for a mortgage
when they finally find an affordable home. Add to that list that
they are paying off student debt."
Here are some key findings:
- Student debt has only a small negative effect on the odds of
homeownership for a person with a bachelor's degree or higher.
The chances of a married coupleii with no student debt
owning a home are about 69.8 percent if at least one of them has a
bachelor's degree. If the same couple has $30,000 in student debt, their homeownership
chances drop slightly, to 67.7 percent.
- The least likely to own homes are people who have student
debt, but no degree. In fact, a couple who borrowed more than
$30,000 for school but never
graduated has a less than 40 percent chance of homeownership.
- Graduates with advanced degrees are the most likely to own a
home, even if they racked up a lot of student debt. For
example, if a couple owes $50,000 in
student loans, but one of them has a master's degree, they have a 75 percent chance of
homeownership. A similar household with just $10,000 in loans and only a bachelor's degree has
just a 69 percent chance of homeownership.
- Student debt has the greatest impact on the homeownership
rate of people with two-year associate's degrees. A couple with
AA degrees and no debt has a 70 percent chance of owning their
home. That declines significantly as debt grows. If the same couple
has $50,000 in student debt, they own
their home only 57 percent of the time.
- Getting an associate's degree improves chances of
homeownership until a person has borrowed $70,000. After that, their chances of
homeownership would have been better without a degree and no
student loan debt.
- Getting a bachelor's,
master's or doctorate degree – regardless of debt – increases the chances that people
will buy a home.
Zillow
Zillow® is the leading real estate and rental marketplace
dedicated to empowering consumers with data, inspiration and
knowledge around the place they call home, and connecting them with
the best local professionals who can help. In addition, Zillow
operates an industry-leading economics and analytics bureau led by
Zillow's Chief Economist Dr. Svenja
Gudell. Dr. Gudell and her team of economists and data
analysts produce extensive housing data and research covering more
than 450 markets at Zillow Real Estate Research. Zillow also
sponsors the quarterly Zillow Home Price Expectations Survey, which
asks more than 100 leading economists, real estate experts and
investment and market strategists to predict the path of the Zillow
Home Value Index over the next five years. Zillow also sponsors the
bi-annual Zillow Housing Confidence Index (ZHCI) which measures
consumer confidence in local housing markets, both currently and
over time. Launched in 2006, Zillow is owned and operated by Zillow
Group (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
i This analysis uses data from the 2013 Panel
Study of Income Dynamics.
ii The probabilities come from a model that predicts
homeownership on several socioeconomic factors including highest
degree earned and student debt outstanding. For the
probabilities quoted here we used a married couple in their early
30s with children, and set income and wealth to be the average of a
household with similar education levels.
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SOURCE Zillow