Two of the most important economic factors present in today's market are the decreasing numbers of first-time homeowners and the increasing volume of outstanding student debt. In an article from fortune.com, with the housing sector slowly returning to normal, many so-called experts have identified the immensity of outstanding student debt as the culprit to full recovery.
While there have been studies to that effect, no definitive proof has been provided, according to the article, as to student loan debt causing younger individuals from purchasing their own homes. To put it another way, no causal relationship has been established to say that the overall student loan burden is leading to smaller numbers of the first time home buyers sector. There are many other factors, such as cultural in nature, that makes young people delay on making life long decisions such as a mortgage and economic as the recent financial crisis affecting all sectors of American society.
In a study conducted by researchers Dartmouth College's Jason Houle and University of Wisconsin's Lawrence Berger, where they sought to find the correlation between student loans and the behavior of potential homebuyers. They used data from the 1997 National Longitudinal Study of Youth to observe a select group with specific demographic criteria as to the effect of student loan debt and homeownership.
The study, published in the Third Way as quoted in the Fortune article, said, "We do find evidence of a negative, statistically significant association between student loan debt and homeownership in some models, the association is substantively small to modest in size, and we find no evidence that the probability of home ownership decreases as the amount of student loan debt taken on by debtors increases. Thus, it seems unlikely that student loan debt is causing a generation of young adults to flee from the housing market; nor does it seem to be the case that student loan debt is primarily responsible for the slow post-recession housing market recovery. However, even if student loan debt isn't reducing home buying, it may well be impacting young people's well-being in other ways."
A more certain study though was recently released by the St. Louis Federal Reserve, as reported on time.com, as to the reason why there are smaller numbers of first time homeowners as of late. The main culprit is the recent recession, as their study found that the younger generation nowadays have a smaller net worth compared to previous generations. In specific numbers, the report says that the median wealth of families with the head at least aged 62 increased their value by 40 percent between 1989 and 2013. This translates to an increase from $150,000 to $210,000. On the other hand, the median wealth of families whose head is aged between 40 and 61 had their value decrease by 28 percent or a lesser amount by $14,000.
Overall, the burden of student debt, while present for millenials, is not the main drawback but merely one of the issues besetting the younger generation in the purchase of their homes in the long run.
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