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Can Higher Education Boost Homeownership?

Conventional wisdom has long suggested that having a college degree puts people in a better position to buy homes. Well, conventional wisdom got the backing of Fannie Mae [1] Wednesday, when the GSE  released the second in a series of studies [1] looking at higher education and housing. What Fannie Mae found was that those with at least a bachelor’s degree are 17.5 percent more likely to be able to buy a home than someone without a high school diploma.

The news comes at a time when federal officials are pondering the weight of student loans on young adults.

“As student loan debt has mounted and young-adult homeownership rates have fallen over the past decade,” wrote Gary Painter, director of social policy, Sol Price Center for Social Innovation, University of Southern California, “considerable attention has focused on the nexus among student loans, education, and homeownership. Recent analyses suggest that the benefits of attaining a college education outweigh the downsides of student loan debt when it comes to achieving homeownership.”

After adjusting the findings of its research for race, age, sex, and marital status in addition to parental resources‒‒surprisingly not as much of a needed factor in homebuying among young and first-time buyers where higher education is concerned‒‒the researchers found that having a bachelor’s or higher degree compared to not having a high school diploma increases noticeably.

“Even after introducing additional controls for the child’s current income and [parental resources],” Painter wrote, “the researchers found that homeownership attainment remains 5.4 percentage points higher for those with at least a bachelor’s degree.”

The education effect on homeownership is also barely dampened when factoring in parental endowments. This, Fannie Mae reports, “reduces the association between education and homeownership for adult children by less than 2 percent.” Painter said the finding suggests that “the educational boost to homeownership is largely independent of the parental resources that may have helped increase education.”

The implication, he said, is that homeownership attainment could be increased through policies that promote higher education and increase human capital.

“While it is not completely understood why higher education is associated with higher homeownership,” Painter wrote, “evidence of an education effect that persists net of household income and wealth suggests that additional mechanisms are at work.”

He suggested that higher education might entail greater financial fluency, including better understanding of the steps necessary to buy a house and access credit markets.