Are Student Loans Really Killing The Housing Market?
Career College Central summary:
Standing tall at $1.2 trillion, the student loan monster has tripled in size in the last decade for two reasons—more students and more debt. Seventy percent more students are getting loans, and the typical borrower is taking on about twice as much. All this debt from school might pay off with higher wages for graduates, but today this wall of debt is preventing students from getting on with their lives. Since student debt is concentrated among young adults who are likely first-time home-buyers, it's particularly devastating to the housing market.
This is a story told over and over—from the Wall Street Journal, Bloomberg Businessweek, the Brookings Institution, Realtor magazine, and the New York Federal Reserve. The housing market needs new buyers, and those new buyers need new debt. But if they're wracked with student debt, already, they won't buy homes, and the real estate business is toast.
It's a plausible narrative backed up by one key factoid seen everywhere: That first-time buyers used to account for 40 percent of the housing market, but now they make up just 30 percent.
But this isn't a fact-fact, according to the Atlanta Fed. It's a Frankenstein-fact, built with two distinct methodologies mashed together. The 30 percent number comes from the Realtors Confidence Index, a newish survey of realtors, and the 40 percent number comes from the Profile of Home Buyers and Sellers, a more established survey of households. According to the broader survey, there has been no major fall-off in first-time buyers as a share of the market. (That spike in 2009 and 2010 coincides with the introduction of a home-buying tax credit from the federal government.)
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