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As Student Debt Rises, Would-Be Homeowners Forced to Choose

With housing costs and college tuitions both on the rise, a newly released survey from online brokerage Redfin finds more and more young, would-be buyers are having to put their plans on hold.

In a February survey of nearly 2,000 homebuyers, Redfin found that 16 percent of first-timers (who made up about half of the total survey group) have been held back from purchasing in the past by student loan debts.

Out of all homebuyers surveyed, one-third said student debt had led them to put off purchasing for one to two years, while slightly less than that said they had to delay for four years or more. With student loan debt surpassing the $1 trillion mark (according to the latest data from the New York Fed), it seems likely that more young Americans may have to hold off for the time being.

However, that might not have to be case, says Redfin Open Book Lender John Wheaton.

“Many young people with student loans delay buying a home because they don’t think they can qualify for a mortgage. Yet, many of them actually can,” Wheaton said. “Underwriters generally treat student debt in a more positive light than credit card or auto loan debt.”

Still though, some may see the difficulties of managing two majors debts as being too great, especially in an uncertain economy—and others aren’t willing to settle for less than what they will eventually be able to afford.

“For my home-buying clients, student debt hasn’t prevented them from buying a home, it has prevented them from buying the home they want,” said Redfin agent Alex Haried. “Instead of buying a $350,000 home, they would rather rent for a few more years as they pay down their student debt and then buy a $500,000 home.”

Those delays are sour news for a market already low on first-time buyer activity.

“For the economy as a whole, this means that rising student debt loads—which should, in theory be a positive sign of a more educated workforce—may be a short-term hindrance to the housing recovery,” concluded Redfin analyst Ellen Haberle.


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