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:Â
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. Â
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.Â
Related Stories
Office Buildings | Jun 3, 2024
Insights for working well in a hybrid world
GBBN Principal and Interior Designer Beth Latto, NCIDQ, LEED AP, ID+C, WELL AP, share a few takeaways, insights, and lessons learned from a recent Post Occupancy Evaluation of the firm's Cincinnati, Ohio, office.
Multifamily Housing | Jun 3, 2024
Grassroots groups becoming a force in housing advocacy
A growing movement of grassroots organizing to support new housing construction is having an impact in city halls across the country. Fed up with high housing costs and the commonly hostile reception to new housing proposals, advocacy groups have sprung up in many communities to attend public meetings to speak in support of developments.
MFPRO+ News | Jun 3, 2024
New York’s office to residential conversion program draws interest from 64 owners
New York City’s Office Conversion Accelerator Program has been contacted by the owners of 64 commercial buildings interested in converting their properties to residential use.
MFPRO+ News | Jun 3, 2024
Seattle mayor wants to scale back energy code to spur more housing construction
Seattle’s mayor recently proposed that the city scale back a scheduled revamping of its building energy code to help boost housing production. The proposal would halt an update to the city’s multifamily and commercial building energy code that is scheduled to take effect later this year.Â
Mass Timber | May 31, 2024
Mass timber a big part of Western Washington University’s net-zero ambitions
Western Washington University, in Bellingham, Wash., 90 miles from Seattle, is in the process of expanding its ABET-accredited programs for electrical engineering, computer engineering and science, and energy science. As part of that process, the university is building Kaiser Borsari Hall, the 54,000-sf new home for those academic disciplines that will include teaching labs, research labs, classrooms, collaborative spaces, and administrative offices.
Construction Costs | May 31, 2024
Despite challenges, 2024 construction material prices continue to stabilize
Gordian’s Q2 2024 Quarterly Construction Cost Insights Report indicates that supply chain issues notwithstanding, many commodities are exhibiting price normalization.
University Buildings | May 30, 2024
Washington University School of Medicine opens one of the world’s largest neuroscience research buildings
In St. Louis’ Cortex Innovation District, Washington University School of Medicine recently opened its new Jeffrey T. Fort Neuroscience Research Building. Designed by CannonDesign and Perkins&Will, the 11-story, 609,000-sf facility is one of the largest neuroscience buildings in the world.
Architects | May 30, 2024
AE firm Goodwyn Mills Cawood merges with Southland Engineering
Architecture and engineering firm Goodwyn Mills Cawood (GMC) is further expanding its services through a strategic merger with engineering firm Southland Engineering in Cartersville, Ga.
K-12 Schools | May 30, 2024
Inclusive design strategies to transform learning spaces
Students with disabilities and those experiencing mental health and behavioral conditions represent a group of the most vulnerable students at risk for failing to connect educationally and socially. Educators and school districts are struggling to accommodate all of these nuanced and, at times, overlapping conditions.
MFPRO+ New Projects | May 29, 2024
Two San Francisco multifamily high rises install onsite water recycling systems
Two high-rise apartment buildings in San Francisco have installed onsite water recycling systems that will reuse a total of 3.9 million gallons of wastewater annually. The recycled water will be used for toilet flushing, cooling towers, and landscape irrigation to significantly reduce water usage in both buildings.