For Many Millennials Home Ownership May Not Be Possible

Posted by wadmin on Monday, August 15, 2016

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It has been no secret to anyone that Millennials have not been as active in the housing market as the generations before them. Many people have assumed that this was because of the increasing amount of debt that they are being saddled with by student loans but the reality is actually a much bigger problem of low wages and high housing prices, especially for those without a degree.

The research, conducted by Andrew Woo for the rental listing website, found that people who did not go to college are in far worse shape when it comes to being able to afford a house than college graduates, even after factoring in student loan debt. The study surveyed 31,000 people between 18 and 34 years old.

“Among millennials without a college degree, however, the outlook for homeownership is bleak,” says the report.

Woo found that these days it would take the average person without a college degree 15 years to be able to afford to buy a house, or five years more than a college grad with student debt. But even that assessment looks optimistic.

Apartment List’s survey found that the average millennial without a college degree saves roughly $2,000 a year, about $1,000 less a month than what a similar-aged college graduate with student loan debt saves. According to Trulia, which is what Woo used, the average starter home these days costs $154,156. That’s how Woo gets to the figure that it would take a non-college graduate 15 years to save up for a downpayment to buy a house.

But here’s the thing: That would only be the case if mortgage rates stay where they are today, at roughly 3.5%, which are at historic lows. At today’s rates, a mortgage on the remaining amount a millennial would owe on a starter home after downpayment, $123,325, would be affordable.

But if rates on 30-year fixed mortgages returned to where they have averaged over the past 15 years, which is 5.5%, it would take a millennial without a college degree an additional eight and a half years to be able to afford a home, or more than 23 years. If instead 30-year mortgage rates go back to where they were 15 years ago, which was 7.3%, then the wait time to buy a house for a non-college grad shoots up by nearly 22 years, for a total of 37 years.

At Stonebridge Mortgage we are dedicated to making sure you end up in the home of your dreams. If you need any buying or financing for your home or office, we are here to help. Check out all Stonebridge Mortgage’s services.

SRC: fortune.com/2016/05/23/homeownership-millennials-college-degree/

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