What is holding back recent college graduates from buying homes?

There are many current economic incentives for first-time home buyers:

• The economy, hiring and job stability is recovering. In many industries starting salaries for new graduates are at an all-time high.
• Interest rates are still low, helping homebuyers afford and qualify for loans.
• Particularly in the east, housing market prices are considered still somewhat under-valued by many experts. (This is not true on the west coast where prices may be over-valued.)
• Renting is currently more expensive than owning in almost every major market.

But researchers are finding that today’s college graduates often face significant hurdles to home-buying, hurdles that are taking many of them several years to overcome.

• Many graduates are leaving school with debt not only from student loans, but consumer debt as well.
• Debt not only affects the ability of graduates to qualify for mortgage loans, debt payments are holding many back from saving for a down payment.
• Good jobs are still hard to find, and 40% of the under-employed are millennials, many of them college graduates.

And there are other “soft” factors moving college graduates toward urban rentals, rather than suburban homes.

• Generation Y is emerging as one of the most urban of generational populations.
• 40% of Gen Y’ers prefer being in or close to downtown, opting for walking and biking distances to work, friends, family and entertainment.
• 20% of Gen Y’ers use public transit once a week or more – more than the rest of the adult population combined. Rentals are more likely to be located within an easy walk to transit stops than are suburban homes.

Fifty years ago a typical new college graduate was a financial blank slate. On the day they started their first career job they might have a very slim bank account, but they were also free of debt, with the possible exception of an automobile. Of course, statistically there were fewer college graduates partly because college was not affordable for many, if not most, families. Tuition had to be paid in cash. Fast forward to today, and student loans have radically changed both the opportunities and the financial picture for higher education.

In addition, today’s high rents are also draining the wallets of many recent graduates. In many markets rent is higher than it has ever been. After rent, taxes and debt payments, for many newer graduates, little is left for saving a down payment.

Although college graduates certainly have an improving outlook for their long-term future, times are still tough to be starting out on their own for the first time. A broad range of factors have recent college graduates creating a growing demand for urban rentals, rather than suburban home ownership.  

Are rentals growing or shrinking as a percentage of your local residential market?

Want to earn money with little or no investment of your own? Check out my new ebook “STREETWISE PROPERTY INVESTING WHOLESALE BLUEPRINT” explaining wholesaling and how to make it work for you!