<p>"First-time home buyers accounted for only a third of the homes purchased over the last year. The below-average number is thanks in part to American’s growing student loan debt. With high monthly payments and increased credit risk, student loan debt is keeping some first-time home buyers from entering the housing market; a trend that doesn’t appear to be turning around anytime soon." …</p>
<p>Maybe they shouldn’t have borrowed as much.</p>
<p>What sort of house would they be buying now if they * hadn’t* attended college?</p>
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Uh, really? Where were the parents when those loans were signed? </p>
<p>As far as the study, I’d want to see the analysis instead of this summary which implies much but doesn’t prove anything. You’d need to see how home buying preferences have changed over time, look at the same markets, etc.</p>
<p>Exactly. Someone that borrows that much money has no business complaining about not buying a house. They dug their own hole. </p>
<p>I had a twenty percent down payment on a house when I was 25. And I’m still paying my student loans off. They can co exist as long as you’re not naive about it. </p>
<p>I currently owe seven more years on student loans, 2.5 more years on car, and 23 years on my house. It will feel so great one I knock one of these bills out… lol</p>
<p>I have some doubts whether people in the mid 20’s set are as interested in buying houses as they used to be. The goal is no longer to settle down and start a family by 25-30, it seems to be more avoiding putting down roots for as long as possible, travel (expensive!), see the world, go on adventures, grow up later. My fiance, who could only afford our house because he DIDN’T go to college, bought our house when he was 27 and I was 23. I have two other friends, both 25, who own houses-- one did not go to college and is getting married and settling down, the other did go to college but doesn’t work-- her boyfriend who did not go to college pays the mortgage. The rest of my friends have zero interest in being “tied down” this young by a responsibility like a house. </p>
<p>For us, the house made a lot of sense even if we weren’t planning on having kids soon. We paid $1300 a month for an apartment in a bad neighborhood and would have paid closer to 2k for a nicer neighborhood, our mortgage is $900 a month for a house twice as big as the apartment in a really great neighborhood with excellent schools. The utilities are less expensive, too. The maintainence is more, but it more than balances out. I’m not sure people realize it can work out that way. My friend’s mortgage on her “starter” house is $400 a month, less than half the rent for most cheapo apartments, if I could get approved for a mortgage with my student loans even I could afford that and I couldn’t afford the apartment. It can make financial sense under the right circumstances.</p>
<p>Our S has no interest in buying at the moment, tho he has a very good income for a single man with no dependents. He is 26+ with a stable job but he isn’t sure even where he wants to live next year! much less years from now. He hasn’t even decided whether he warns to return to school part or full time. </p>
<p>We have offered to help him with a down payment and he has no debt but buying his own place in HI or elsewhere is NOT a priority for him at this time. </p>
<p>I agree there are a lot of factors that weigh in any choice about home ownership–debt is PART of the equation. </p>
<p>That as well ema… people don’t realize how much cheaper it can be to own in certain areas. My house would rent for about 500 more then I pay a month in mortgage. </p>
<p>I think the issue here isn’t that some people don’t want to, but rather those who want to yet realize that banks won’t loan to them - which makes sense, after the subprime crisis, ability to reimburse based on actual disposable income has become paramount. This situation would be a negative for the overall economy. Keep in mind that not many 26 year olds want to buy a house, but most 30 to 25 year olds do… and they may still be paying back those huge loans with no ability to buy anything.</p>
<p>However it’s too easy to blame the young people who took on those loans: 18 year olds have <em>no idea</em> how loans accumulate and how hard they’re to reimburse, how long it’ll take, etc. And here on CC even 5 years ago how many people were saying “take the loan for the more prestigious/dream school”?
Things have changed a lot in a few years. Finally, there are STILL parents who think it’s okay to cosign for $80,000 in loans because they’ve told their child “don’t worry, we’ll find a way to make it work” so when the child only has unaffordable options they’re stuck.</p>
<p>The article highlights an interesting public policy issue. </p>
<p>Due to the mortgage problems evidenced during the Great Recession and in the rush to punish the banks, the “wise people” in Washington decided that the public needed protection from themselves. Banks could be sued for making “loans that were not affordable”. But in order to make sure the mortgage lending market did not totally evaporate, Washington specified “safe harbor” loan underwriting standards. If you stick to Washington’s standards you can not be sued. </p>
<p>The loan-to-income standards are not nearly as tight as what was generally accepted back in the early 80’s - but they are stricter than the loose standards of the early 2000’s. However, what has happened is the ability of the banker to use some professional judgement to approve borderline cases or those where someone’s source of wealth/repayment is non-standard. The only banks I know of that are going to lend outside the safe harbor, are Wealth Management banks who cater to the affluent. (This is often necessary for their clients since the wealth of most affluent persons tends not to be on a pay stub, but in the value of investments and other assets. They also won’t be likely to raise the “I’m a clueless fool and didn’t know what I was doing” argument, since that wouldn’t go over well with the country club crowd.) So as noted in the article, what was meant to help the public, may now be hurting the public and real estate market/economy in general, since the ability of young adults to enter the housing market and buy starter homes, is what gives young families the ability to buy a move-up home etc…</p>
<p>The next question is, if the government is in the business of protecting people from themselves, shouldn’t student loans carry warnings in large bold type stating that taking this loan may adversely impact the ability of the student to purchase a home or automobile in the future? </p>
<p>Myos , I get what you’re saying but if an 18 year old doesn’t realize they’re about to sign their life away be borrowing so much money, then maybe they shouldn’t be going off independently to school. Managing money and bills is something I was taught from a young age. If they haven’t learned on their own then their parents or sometime should be educating them, not signing haphazardly. I’d be curious to see what, if any, the credit card debt for these folks is. It seems like people either know how to handle money or don’t. Rare middle ground in my experiences.</p>
<p>I had an intern a few months ago who was thinking his 50k in student loans would be 100 a month. No clue who did his math for him, but he was shocked to find out how much they really were. </p>
<p>I have co workers whose monthly student loans are the same figure as my mortgage. </p>
<p>It just amazes me. It’s just like people who but houses they can’t afford. They need to do some math. When I got pre approved for my mortgage, they approved me for about 80k more then I actually borrowed. I knew their figure was bogus. Maybe it would have worried if I didn’t expect to ever buy a new car, or take a vacation, , or never eat or heat my house… sure. But not with living like a normal person would.</p>
<p>Well, very few people take statistics in school and for half high school students, their math skills are really poor. In addition, 18 year olds truly have no idea what life costs, and it’s normal since they’ve never lived on their own. It doesn’t mean they can’t go away to school, in fact they really should if they can because they’ll learn more from being away at college than by living at home, and if they’re intellectually ready it’ll actually help more - they’ll grow more mature, become more independent, will keep a job, and after graduation they’ll have had a first experience handling themselves independently; time and experience will teach them. Going to college is about having good grades, being responsible about one’s work, etc. It’s impossible for 18 olds to imagine themselves at age 21 let alone understand what reimbursements over 25 years mean.
Finally, some people are purposely deceived (their lack of skills, gullability, or youth, are taken advantage of by unscrupulous lenders.) YOU knew the BANK’s figure was bogus, but for most people, if the bank gives you a figure, well, it’s the banker’s job to know their numbers… why should they doubt them? And how would they go about knowing whether that number is bogus or solid?
It’s not innate, it’s taught, then practiced and reviewed. Some people “just know”, just like some people are extraordinary at learning foreign languages or writing code, but for the majority of us, it requires being taught then being able to practice.
Some limits have been placed on credit cards, too. There’s now a limit to how much you can borrow based on your actual income. In the late 1990’s and early 2000’s, even college freshmen could have credit cards just by picking a request card off the wall. There was no education about borrowing and even today few high schools require a class in personal finance.</p>
<p>I’ll stick my neck out and say I had no idea what I was doing when I signed for my loans. I knew it would be “really hard” to pay them back and that I would probably be “poor” but had no concept of what that meant, and I was repeatedly being told, “if you don’t go to college, you will never be able to support yourself.” I had no adult helping me in any way from start to finish for the whole process. I sincerely didn’t think I had a choice. I was ignorant. I also had plans A through D of different careers I could do with my degree which would allow me to pay off the loans, and didn’t realize until senior year that I either didn’t want to or couldn’t actually do any of those things. I knew how much my loans would be, and about how much an apartment would be, but not utilities or insurance. I had a vague idea in my head of how much these things cost, which was incorrect, that I thought I had right. I thought I would qualify for income contingent repayment and didn’t realize I had misunderstood until it was too late, which didn’t help either. When I made these decisions, I’d had a bank account for a grand total of two weeks and had never paid a bill in my life. much less seen one to know how much it would be. </p>
<p>I’ll be the first to admit I was a complete fool with “magical thinking,” but I didn’t know any better even if I should have. I read through all the paperwork word by word and could recite the terms of my loan from memory, which made me think I was pretty bright since most people don’t even read those papers, but none of it meant anything meaningful to me at the time. I’m sure I’m not the only one. Meanwhile, my guidance counselor was chirping in my ear, "Just go to school! If you get in, the money will be there! It will all work out somehow! Things just have a way of working out when we’re really determined! You want a job don’t you? You’ll NEVER get a job if you don’t go!</p>
<p>Thankfully, that was only a mistake I needed to make once-- no, I am not a financial dunce for life, thank you very much. I have no other debt. I have two credit cards that are paid off in full each month, they are never used unless I have cash in the bank to pay already. I’ve never overdrawn account, bounced a check, or been late on a payment. When fiance applied for his mortgage I knew exactly what he was doing and did all the math and figured it out for him. I’m now solely responsible for managing our household’s finances and I do fine with it, we have almost as much in savings from the last year to pay off one of my loans. We save more than half our take home salary. I get that it can be hard to believe that anyone could be as stupid as I was to take 55k in loans and not realize how much it would hurt, but you don’t need to look down your nose at me. Not everybody has the benefit of being “taught from a young age.” There are kids here who can’t even figure out how to submit their common apps without their parents help, I hope you realize you are not typical in being able to figure all this out yourself at 18 without making mistakes. Getting your very first taste of adulthood in the form of a loan application in front of you doesn’t bode well for anybody without any adult guidance.</p>
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<p>Her parents likely co-signed the loans. Georgetown meets full need, less the standard federal loans. Thus, anything additional she had to go the private route, which requires co-signers.</p>
<p>Ema, apologize. I didn’t mean anything personal. </p>
<p>I sometimes forget that my home town is the abnormal one. Where I grew up we were working by 14/15 ish… some 16. a total blue collar type town full of lower middle class people. </p>
<p>Jus to explain where my thoughts are coming from… My first bill was when I was 14 and bought a computer and signed up for the internet (well, my parents had to since they were the adult and I paid them…). We all drove beater cars that we purchased with our savings from work… second monthly bill was the prepaid cell I got myself when I was 16. Third monthly bill was car insurance. Fourth monthly bill was my credit card that my mom co signed for at 16 with instructions that it had to be paid off in full each month and to never carry a balance. </p>
<p>I sometimes forget that other towns are different from mine. We just all learned this stuff early on by managing our bills.</p>
<p>Again, I meant no offense. </p>
<p>
The percentage of first time home buyers over the past decade, as reported by the NAR is below:</p>
<p>2003 - 40%
2005 - 40%
2007 - 39%
2009 - 47%
2011 - 37%
2013 - 38%</p>
<p>Why would anyone conclude that the changes are primarily related to student loans? The most noticeable change is the large increase in 2009, followed by a return to near normal levels in 2011. My guess is this relates to the federal incentives for first time home buyers following the subprime mortgage crisis. As I recall, the government gave an $8000 credit to first time home buyers in 2009. There is expected to be a rebound effect with percent of first time home buyers below normal, following the end of the incentives. I also find it interesting that the percent of first time home buyers did not decrease significantly when home prices increased in ~2007. My guess is that the first time home buyers percentage has more to do with whether home buyers are permitted to get a loan for the cost of a first home than what the actual prices are or whether they can afford the loan payment. Along the same lines, I’d expect the slight change from 2003 to 2013 is far more likely to relate to new laws that place greater restrictions on mortgage loans than a higher average student debt. </p>
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<p>That’s different. The government profits directly from student loans where they don’t from home loans. </p>
<p>But for figuring out payments, all you need is some high school algebra. Or even easier, an online calculator. How many people are going to a university without having taken and passed a high school algebra or equivalent course?</p>
<p>Part of this comes I think from recent graduates flocking to a few particular cities. I’ve generally noticed SF, Seattle, Austin, Chicago, and NYC being most popular (generally in that order) but in different circles the list would probably also include DC, Miami, Boston, LA, Dallas, and San Diego. These places are expensive (maybe not as much in Texas, but they’re not quite cheap either). Sure, I might have made a little more if I had searched for a job in SF instead of where I am now, but here I can buy a 2 bedroom house with a yard and garage for what I make in a year and a half. No chance at doing that in San Francisco right out of college. Sure, it’s not as attractive a city as San Francisco, but the cost of living makes up for it. </p>
<p>I’m waiting a while to buy a house myself because I’m waiting for either more incentive to do so, or until I have a very substantial down payment ready, and am more certain of what I’ll be doing longer term. If you don’t have roots down in the community yet, doing so could have the additional problem of being a huge hassle to buy and sell with expensive transaction costs. </p>
<p>Data10 - the new federal underwriting standards that are the subject of the article only came into effect on January 10, 2014 so there can not have been any impact in the data you provided. </p>
<p>Attached is an article with more about the new rules and it goes over some of the rules and some of the concerns about them.<br>
<a href=“Bankers bridle at new federal mortgage rules”>http://www.jsonline.com/business/bankers-bridle-at-new-federal-mortgage-rules-b99160745z1-235877101.html</a></p>
<p>
I’ve quoted the first 2 sentences of the article again.</p>
<p>*First-time home buyers accounted for only a third of the homes purchased over the last year. The below-average number is thanks in part to American’s growing student loan debt. *</p>
<p>Note that the quote above, which I referenced in my earlier post, talks about homes purchased over the last year (a year I included in the table), not just homes purchased since the January 2014 underwriting standards.</p>