Eight percent fewer homes will transact in 2014 than normal, purely due to student loan debt, according to analysis by Rick Palacios, Jr., and Ali Wolf of John Burns Real Estate Consulting.
In a new 30-page paper, the firm assesses the impact of student loans on home buying for households under the age of 40. Its conclusion: 414,000 transactions will be lost in 2014 due to student debt. At a typical price of $200,000, that equals $83 billion in lost volume.
Palacios and Wolf explain their methodology and findings:
The analysis was quite complicated and involved a few assumptions, but we believe it is conservative, primarily because we looked only at those under the age of 40 with student debt.
At a high level, the math is as follows:
• Student debt has ballooned from $241 billion to $1.1 trillion in just 11 years.
• 29 million of the 86 million people aged 20-39 have some student debt.
• Those 29 million individuals translate to 16.8 million households.
• Of the 16.8 million households, 5.9 million (or 35%) pay more than $250 per month in student loans, which inhibits at least $44,000 per year in mortgage capability for each of them.
• About 8% of the 20-39 age cohort usually buys a home each year, which would be 1.35 million transactions per year.
• Using previous academic literature as a benchmark for our own complicated calculation, we then estimated that today's purchase rate is reduced from the normal 8% depending on the level of student debt--ranging from 6.9% for those paying less than $100 per month in student loans to less than 1% for those paying over $1,300 per month. Other factors contribute to even less entry-level buying today.
While we applaud the increasing education, we need to realize that it comes with a cost known as student debt. We raised the red flag on student debt back in 2011 and continue to believe that this debt will delay homeownership for many, or at least require that they buy a less expensive home.
Related Stories
| Aug 11, 2010
Berkebile wins $100K award for commitment to environment
Robert Berkebile, the founding principal of BNIM Architects and a founding member of the U.S. Green Building Council, has been selected to receive a $100,000 Heinz Award. The award honors his role in promoting green building design and for his commitment and action toward restoring social, economic, and environmental vitality to America’s communities through sustainable architecture and planning.
| Aug 11, 2010
Polshek Partnership unveils design for University of North Texas business building
New York-based architect Polshek Partnership today unveiled its design scheme for the $70 million Business Leadership Building at the University of North Texas in Denton. Designed to provide UNT’s 5,400-plus business majors the highest level of academic instruction and professional training, the 180,000-sf facility will include an open atrium, an internet café, and numerous study and tutoring rooms—all designed to help develop a spirit of collaboration and team-oriented focus.
| Aug 11, 2010
University of Florida aiming for nation’s first LEED Platinum parking garage
If all goes as planned, the University of Florida’s new $20 million Southwest Parking Garage Complex in Gainesville will soon become the first parking facility in the country to earn LEED Platinum status. Designed by the Boca Raton office of PGAL to meet criteria for the highest LEED certification category, the garage complex includes a six-level, 313,000-sf parking garage (927 spaces) and an attached, 10,000-sf, two-story transportation and parking services office building.
| Aug 11, 2010
Draft NIST report on Cowboys practice facility collapse released for public comment
A fabric-covered, steel frame practice facility owned by the National Football League’s Dallas Cowboys collapsed under wind loads significantly less than those required under applicable design standards, according to a report released today for public comment by the Commerce Department's National Institute of Standards and Technology (NIST).
| Aug 11, 2010
Callison, MulvannyG2 among nation's largest retail design firms, according to BD+C's Giants 300 report
A ranking of the Top 75 Retail Design Firms based on Building Design+Construction's 2009 Giants 300 survey. For more Giants 300 rankings, visit http://www.BDCnetwork.com/Giants
| Aug 11, 2010
USGBC honors Brad Pitt's Make It Right New Orleans as the ‘largest and greenest single-family community in the world’
U.S. Green Building Council President, CEO and Founding Chair Rick Fedrizzi today declared that the neighborhood being built by Make It Right New Orleans, the post-Katrina housing initiative launched by actor Brad Pitt, is the “largest and greenest community of single-family homes in the world” at the annual Clinton Global Initiative meeting in New York.
| Aug 11, 2010
AIA report estimates up to 270,000 construction industry jobs could be created if the American Clean Energy Security Act is passed
With the encouragement of Senate majority leader Harry Reid (D-NV), the American Institute of Architects (AIA) conducted a study to determine how many jobs in the design and construction industry could be created if the American Clean Energy Security Act (H.R. 2454; also known as the Waxman-Markey Bill) is enacted.
| Aug 11, 2010
Architect Michael Graves to be inducted into the N.J. Hall of Fame
Architect Michael Graves of Princeton, N.J., being inducted into the N.J. Hall of Fame.
