As you’ve probably heard, Millennials just aren’t buying houses like young people used to.
Many iterations of this story have already been told: They’re living with roommates (parental or otherwise), renting rather than buying, and blowing their paychecks on fancy brunches instead of bungalows. Partly to blame is the fact that housing prices have rapidly outpaced incomes since 1980. But there’s another trend that’s magnified the effects of this: An increase in college attendance. That otherwise positive development has triggered mounting student debt, thanks to a spike in tuition costs. In 2015, students who took out student loans graduated with 70 percent more debt than those just 10 years earlier, racking up an average of $34,000 that some are fated to pay off for decades.
According to a new study released by ApartmentList, the college graduates saddled with that debt are saving half as much for down payments as those without it, and taking about four years longer to put a first payment down.
But skipping higher education isn’t the answer: Those who did not complete college at all are even worse off.
Owning a home has historically allowed people to build equity, so putting a down payment on a place sooner often means paying off a mortgage earlier and saving for retirement longer. If Millennials are shut out of this cycle, their future economic prospects may look less secure than that of generations before. And with fewer people buying, the demand on rental units is higher, leading to shortages and price spikes.
“For a number of decades now the housing market has kind of been chugging along at some sort of expectation of at what age people will buy homes, and what share of them will buy homes,” said Chris Salviati, a housing economist at ApartmentList and the author of the report. “But what we’re seeing now is potentially a broad structural change in the housing market.”
The mounting cost of a higher education, and the relative importance of securing one, is partly to blame, the report suggests. In 2016, 36.1 percent of Americans ages 25 to 29 had a bachelor’s degree, compared to only 22.5 percent in 1980. Getting a degree is (correctly) seen as a worthy investment—it improves access to higher-skilled jobs and increased future earning potential. But the average cost of an undergraduate education has increased by 160 percent since 1980, while incomes have only increased by 25 percent. According to recent counts, 44 million Americans have now accrued $1.4 trillion in student debt, double what it was in 2009. Based the sample used in the report, 57 percent of Millennials age 22 to 35 with college degrees are currently paying back student loans.
Research released this summer by the New York Fed also found strong correlation between the decline in American home ownership between 2007 and 2015 and high student loan debts: By their estimates, 360,000 fewer Millennials bought homes in 2015 than past data would have predicted. And studies by the National Association of Realtors in 2016 and Pew in 2012 show that students are getting the message: 50 to 75 percent of respondents in each survey said they believed student loan debt was preventing them from buying a home.