A few days ago The Washington Post published an article about student loan debt and how it is impacting the housing recovery. Young adults are being discouraged from purchasing their first home because of student loan debt.
“Recent improvements in the housing market have been fueled largely by investors who snapped up homes in the past few years. But that demand is waning as prices climb and mortgage rates rise. An analysis by the Mortgage Bankers Association found that loan applications for home purchases have slipped nearly 20 percent in the past four months compared with the same period a year earlier.
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.”
The article goes on to cite new federal lending rules as being a factor that prevents young people from taking out mortgages because one’s totally monthly debt cannot exceed 43 percent of his monthly gross income.
Student loan debt disproportionately impacts students of color. According to a report by the Center for American Progress, 81 percent of African American students and 67 percent of Latino students who earn bachelor’s degrees leave school with student loan debt, compared to 64 percent of their white peers.
Compounding the problem is young adults making up a large portion of the nation’s unemployed and college graduates increasingly working in low wage jobs.
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