Housing Industry Losing $83B a Year via Student Loan Debt

A new report estimates the housing industry is losing $83 billion a year because of student loan debt crisis. The report, published by John Burns Consulting, a firm that advises home builders, estimates that 414,000 homes in the U.S. will not be sold per year because of student debt. According to the firm, every $250 per month in payments on student debt reduces a household’s home purchasing power by $44,000; 35% of student loan borrowers (or 14 million people) have payments that high. Rick Palacios, the director of research at the firm, even said he thought the number was a bit conservative. “We’re only looking at people age 20 to 40. We know there’s a big chunk of households over age 40 who have student debt, too.”

This report starkly contrasts a RealtyTrac study published earlier in the month that claimed 96% of the U.S. housing markets were still affordable for recent graduates saddled with student debt. However, as this Demos blog points out, RealtyTrac’s study says a recent graduate with average levels of debt, who is employed, and who is making the median household income, could afford to make housing payments. Many recent graduates don’t fit this mold. Even if a borrower does graduate college, they have a hard time finding a job, making the median household income, and qualifying for a mortgage loan.

This report is further evidence that student loan debt has a significant effect on the housing industry. The Federal Reserve Bank of New York found that former students with loan debt are less likely to own a house than people who never attended college. Plus, trade groups, like the National Association of Realtors, have noted student debt is key to the low first-time home buyer rates.

If you would like to read more about the study, the LA Times, the Milwaukee Journal Sentinel, and the Florida Courier have written articles about it.