Many young adults struggle to become homeowners, with the student debt burden delaying, in part, their ability to buy, according to speakers at a regulatory issues forum on student debt and home-ownership at the 2016 Realtors® Legislative Meetings & Trade Expo taking place this week in Washington, D.C.
New condo rules could help student debt challenge
U.S. Housing and Urban Development (HUD) Secretary Julián Castro led the session on student loan debt along with its impact on first-time buyers. During his remarks, Castro announced that some regulatory changes were coming soon for young men and women, many of whom are currently repaying loans they borrowed to earn a college degree.
Castro said the prescription to the American Dream has always been working hard, conserving money and investing in yourself, often through getting a great education. What’s changed in recent years: The third step – getting a great education – is more expensive than ever before.
Castro highlighted a change in condo financing that could present an out sized impact on Florida due to state’s high number of condos.
Castro noted that the Federal Housing Administration (FHA) announced changes to condo rules last November that address a complex re-certification process, owner-occupancy requirements, and limits on the types of property insurance that FHA considers acceptable coverage. According to Castro, the proposed condo rule has left the HUD building and is at the Office of Management and Budget for review.
“Today’s exciting news about the big changes coming to condos are a long-fought win for Realtors, and we’re eager to see it come to fruition,” said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “Realtors know that condos are an important option for buyers, especially for first-time buyers looking for affordable options in the marketplace.”
“Realtors help make the dream of home ownership for so many Americans a reality, and HUD is committed to partnering with them to ensure that the hard-won progress we’re seeing in our housing market continues to grow for many years to come,” Castro concluded.
A panel discussion followed Castro’s presentation, led by Rohit Chopra, a senior official at the U.S. Department of Education; Meta Brown, senior economist at the Federal Reserve Bank of New York; Jessica Lautz, NAR managing director of survey research; and Mabel Guzman, chairwoman of NAR’s student loan debt work group.
The panel agreed that affordability concerns, inventory shortages and lifestyle factors such as marrying later and having to student loan debt, burden a segment of creditworthy buyers by making it hard to save for the down payment.
Chopra discusses some of the ways the Education Department is addressing student loan debt. He said income-based repayment options and holding student loan servicers more accountable throughout the repayment process would help. “We need to make sure the pillars of the American Dream of graduating from college and owning a home go together – and not compete with each other,” he said.
Sharing research from the New York Fed, Brown explained how student debt has defied the existing business cycle of the past 10 years. Non-mortgage debt balances, which include debt from car loans and credit cards, declined right after the Great Recession, and have since either flatlined or rebounded slowly. Student debt balances, however, have been the exception and ballooned from about $300 billion at the end of 2004 to over $1.2 trillion debt today.
Brown figured that high student debt is likely creating a growing share of young student borrowers who’re retreating from the housing market and eventually having to live with their parents.
Pointing to NAR survey data, Lautz said even with the numerous obstacles they face, millennials do make up the largest share of buyers among all generations, and over 90 % of them currently renting have indicated a desire to be homeowners in the foreseeable future.
“With home prices and rents going up, saving for the down payment is a challenge for most would-be buyers,” said Lautz. “Unfortunately, among additional factors, repaying student debt is delaying a typical individuals’ road to home ownership by roughly five years.”
The final speaker, Guzman, said that in addition to Congress passing legislation that assists ease borrowers’ debt burden, Realtors can play an important role by working with their young clients at the beginning stages in their housing needs, particularly during the leasing process when they’re renting their first place.
“Realtors can be a resourceful advocate for their young clients repaying student debt by educating them about their housing options and pointing them to credible resources, such as the Consumer Financial Protection Bureau’s information on student debt,” said Guzman. “The urge to be a homeowner is not lost among young adults, and we can all work together early in the process to make sure they’re able to buy when they’re ready.”
Nick & Cindy Davis can assist you with your home purchase here in the Tampa Bay and surrounding areas. We are always just a click here away. Or you can reach us at 813-300-7116.