For young people, moving to the Columbia SC and buying a Columbia SC home hasn’t made much mathematical sense for decades. But now add a new economic fact of life to the list: soaring student loan debt.
More students are taking out bigger loans than ever before, and in the last 10 years alone, education debt tripled, reaching over $1 trillion. A record number of college students are graduating knee deep in a financial hole before they begin their adult lives.
Still, new research suggests that college is working, economically. Four years on campus nets the average graduate almost twice as much in wages as someone without a degree. Those odds may be comforting in the long run, but not when you're young, deep in debt and buying a Columbia SC home, or at least trying to buy in the Columbia SC .
Student Loan Debt Preventing Most From Buying a Columbia SC Home
Data released by the Federal Reserve Bank suggests that the relationship between student loan debt and the housing market has turned ugly fast. People with student debt used to buy homes at higher rates than peers who had not taken out loans, partly because going to college meant earning more money, according to the report.
But in 2012, the Fed reported that for the first time in at least a decade, 30-year-old student borrowers were less likely to take out home mortgages than other young people. Among people around 30 years old, homeownership was plunging fastest for student debtors.
Economists are worried. Last month, former Treasury Secretary Lawrence Summers said that student loan debt was taking the life out of the housing recovery, and the Nobel laureate Joseph Stiglitz called the rising debt "an educational crisis" that is "affecting our potential future growth."
But if it is a crisis, then it begins long before twenty-somethings turn 30 and start to think about buying a Columbia SC home. From the moment they leave the classroom and enter the real world, young people are often on a delayed schedule, unable to take even baby steps toward buying a Columbia SC home.
The impending payments and the pressure of shouldering utilities and maintenance alone has forced many would-be Columbia SC homebuyers to either look for a roommate and rent, or move back home with mom and dad. It's a housing crisis of national proportion, not just affecting those wanting to buy a home in Columbia SC .
Find more articles about buying a Columbia SC home under the Columbia SC Real Estate Categories to your right.
Renting a Columbia SC house used to be a popular choice over buying because it was cheap. Today, 1 out of 3 people pay rent for a 3-bedroom home that is more than 30% of their monthly median income, according to RealtyTrac. So why do people continue renting a Columbia SC house instead of buying, you might ask?
Years of economic uncertainty have scared many potential buyers. With that, the demand for rentals has skyrocketed, while the cost to rent has done the same. With renting costs so high, people are left having to cut back spending on food, health care and retirement.
Renting a Columbia SC House and Wondering if You're Paying Too Much?
It's recommended you allocate no more than 30% of your total household income towards renting a Columbia SC house or apartment. If you're currently renting and curious as to the average other renters in your area are paying, take a look at RentOMeter.com. All you have to do is type in your address, how much you pay per month and the number of bedrooms. In a matter of seconds, you'll see what the average rent is within a certain distance from your home, based on the number of bedrooms. With that, you can better gauge how good (or bad) of a deal you're actually getting for what you're paying.
If you've already signed on the dotted line for your lease, there's not much you can do to get out of your lease. However, if you're just starting to look for a new home, use the RentOMeter website to get a better understanding of what typical rental costs are for renting a Columbia SC house before you actually look at individual properties. You can try to use the figures as a bargaining piece and possibly lower the monthly payment.
While it has become increasingly more expensive to rent, you might consider buying a home. If you need help trying to decide if it's more feasible for you to continue renting a Columbia SC house, or looking at possible ownership, contact us and we'll be happy to sit down with you and "run the numbers" for you to see which makes the most sense for your individual circumstances.
Visit our Columbia SC Homebuyer Tips section of articles under our Columbia SC Real Estate Categories to the right for tips on buying a Columbia SC home.
The dream of Columbia SC homeownership appears to be fading, according to a recent poll by Harris Poll conducted on behalf of the the National Endowment for Financial Education (NEFE).
50 percent of American adults say their top financial goal is having enough money for retirement. In fact, the percentage of people who cite having enough money for retirement as their top financial goal is on the rise since the recession. In 2011, when NEFE asked American adults the same question, 47 percent said having enough money for retirement was their top financial goal.
In 2011, 17 percent said homeownership was their most-important financial goal, compared to just 13 percent in the latest findings.
Biggest Barrier to Columbia SC Homeownership
There are barriers that limit people from reaching their goals, with 63 percent citing the inability to save enough as an obstacle (compared to 70 percent in 2011) and 47 percent stating that managing debt is a hindrance (compared to 54 percent in 2011).
In addition to not having enough cash for a down payment, tighter credit standards are keeping many first-time buyers out of Columbia SC homeownership.
According to the National Association of Realtors, the average accepted credit score on conventional mortgages is about 720. A credit score that would have gotten you a mortgage before 2008 is now below the average rejection score. The problem is overly restrictive mortgage lending standards, relying on arbitrarily high credit scores. Although this appears to be easing back somewhat, scores still must be considerably higher today for a borrower to realize the dream of Columbia SC homeownership.
Besides the affordability of Columbia SC homeownership, the thing that is attracting new investors and first time buyers into the home buying market are steadily increasing rents. Strong rental growth is happening in both the single-family market and the multifamily apartment market. Average U.S. rents are predicted to continue increasing at a rate of about 4% annually for some years to come although the inflation rate currently stands at 2.9%.
Columbia SC home values have been on the rise for the past couple of years following one of the worst economic crashes in modern day history. But what does this mean for you as a Columbia SC homeowner?
The most obvious advantage of rising Columbia SC home values is, you may be in a better position to sell, if that's what you've been waiting for. If you're on the fence or have been waiting to put your home on the market, its value can be a strong influential factor in your decision. But what if you want to stay put?
Rising Columbia SC Home Values May Mean More Cash Now
Maybe a cash out refinance is a good option for you since we've seen such rising Columbia SC home values over the past couple of years.
If your Columbia SC home value has gone up, you may be able to turn some of that equity into cash. A cash-out refinance allows you to refinance into a new mortgage for more than what you currently owe. The benefit? You can use the difference for pretty much anything.
This may be a good option if you're in immediate need of some extra money, if you want to pay off high-interest credit card debt or if you're just looking to make some home improvements to increase the value of your home. The possibilities are endless!
Rising Columbia SC Home Values Could Eliminate PMI
If you pay private mortgage insurance (PMI) for your conventional loan, or a mortgage insurance premium (MIP) for your FHA loan, an increase in your home's value might mean extra savings. If your home's value has gone up, your loan-to-value (LTV) ratio may have changed, so you might be able to cancel your PMI.
You may be able to request cancellation of your PMI once the unpaid balance of your loan has reached 80%, as long as you meet the following criteria:
- You must have a good payment history;
- The value of your home must not have declined below its original value; and
- There are no other liens on the property, such as a second mortgage.
If your PMI is not canceled at 80%, your servicer must automatically terminate it when your LTV ratio reaches 78% based on your initial amortization. This does not apply to investment properties or lender-paid mortgage insurance (LPMI), however.
Rising Columbia SC Home Values Could Mean Higher Taxes
As Columbia SC home values rise and fall, property taxes usually follow suit. If your mortgage lender manages your taxes and insurance for you through an escrow account, your monthly mortgage payment could increase if you need more money in your account to cover your increased property taxes.
If you know there's a good chance your property taxes will increase, you can make additional payments toward your escrow account at any time during the year to alleviate the potential escrow shortage.
Those are just a few of the pro's and con's of rising Columbia SC home values. Obviously, if you're a potential home buyer, there are even more con's to rising Columbia SC home values.
Questions or concerns about rising Columbia SC home values? Let us know in the comments box below. We'd love to hear from you.
A potential Columbia SC housing crisis is looming due to the unknowns surrounding the group of homeowners known affectionately as the "Baby Boomers."
These babies, born between 1946 and 1964, are now between 50 and 67 years old. Many are at or near retirement age, and many of them no longer need the large homes in which they raised their families.
What May Cause This Columbia SC Housing Crisis
Many of these boomers are getting ready to downsize and simplify their lives, trading off mowing the lawn for other recreational activities.
Where the Columbia SC housing crisis could blossom from this is when all these people try to sell their big, expensive properties, and there are not enough buyers. The majority of the younger folks—the ones who need and want these large homes—now can't afford them. The sad fact is that U.S. incomes are declining due to a variety of factors, not the least of which is inflation and higher costs of living.
It is expected that over the next five or six years, baby boomers will increasingly put their Columbia SC houses on the market. This will steadily increase the unsold inventory of homes, and such a supply/demand imbalance will cause housing prices to drop and siphon equity off boomers' biggest assets.
On the other side of the coin, the number of suburban condos and urban apartments for sale or rent will decline with the increased demand from the burgeoning crowd of boomers, thereby causing prices to rise and putting added pressure on the retirees' ability to pull off the swap.
Nearly half of all boomers actually prefer to stay in their homes, but the question is, are their homes set up to function as long as they live? According to a survey done by The Hartford AARP and Massachusetts Institute of Technology (MIT) AgeLab, three quarters of boomer couples have talked about age-related changes, but less than a third have made any plans. Over 95 percent know what changes to make, but just one quarter have, in fact, made any modifications.
So the question looms: Will boomers create the next Columbia SC housing crisis with downsizing?
What do you think? Let us know by commenting below. If you're a "boomer", we'd love to know if you've made plans, or how you are thinking about housing as your enter your retirement years.
For more on Columbia SC housing crisis trends and news, visit our Columbia SC Real Estate section of articles under our Columbia SC Real Estate Categories to the right.