The Columbia SC home buying experience continues to be an elusive one for many first-time purchasers for a variety of reasons. Student loan debt is among the biggest hurdles facing prospective buyers that ordinarily would be prime candidates to purchase homes. In addition, not only is student loan debt responsible for delaying first time home buyers from entering the market, in some cases it has long-term effects.

A recent study was conducted by the National Association of Realtors in conjunction with SALT, a consumer literacy program provided by the nonprofit American Student Assistance organization. The study’s findings show that 71% of non-homeowners with student loan debt say that debt is the biggest obstacle preventing them from buying a home. Even more concerning was the revelation that more than half of the respondents said their student loan debt would likely keep them from buying for the next five years or more. Let’s examine how the Columbia SC home buying arena is being impacted by student loan debt.

Columbia SC Home Buying: The Student Loan Debt Roadblock

Not only has mounting student debt affected the housing market in terms of purchasing, it remains a serious roadblock for college graduates unable to comfortably afford rising rents in many parts of the U.S. Student loan debt is identified as the main reason 4 out of 10 college graduates still live with family members. These and other findings were the result of the recent survey of 3,000 people who are making on-time payments on their student loans.

The survey showed the lion’s share of those postponing Columbia SC home buying was comprised of older Millennials, aged 26-35. They were also the segment carrying the most debt – ranging from $70,000 to $100,000.

Surprisingly, over half of those surveyed in each segment reported that student debt – regardless of the amount – was affecting their ability to buy a home and postponed their decision to do so. Roughly half of younger Millennials live with family members, some paying rent and some not.

While college graduates as a whole are more likely to maintain steady employment and have the income to qualify for home ownership, their student loan debt payments are standing in the way. As one student put it, “Student loan debt is far outweighing the benefits of my degree.”

Even more frustrating to many is the realization that interest rates on student loan debt is markedly higher than current mortgage interest rates.

A majority of the non-homeowners in the survey who earn more than $50,000 annually reported that their student loan debt adversely affects their ability to save money for a down payment. Those earning $50,000 or more are above the median income level necessary to purchase a single-family home in the U.S.

Student Loan Debt Adding Stress

The added stress of several hundred dollars per month on a student loan when added to the normal demands on a household budget equates to thousands of dollars over time that could be used for a down payment.

A total of 80% of the Millennials in the survey said their student debt clearly hampered their ability – and willingness – to save for a down payment to purchase their first home. While low down payment loan programs are available in the Columbia SC home buying marketplace, those options come with certain restrictions. The low down payment loans have tight limitations on the borrowers debt-to-income ratio, and student loan debt figures heavily in the equation.

Ironically, prospective buyers aren’t alone in their student debt woes. Student loan debt is also responsible for changing the perspective and decisions of potential home sellers. Almost one third of current homeowners surveyed reported they were putting their plans of selling on hold because of their student loan debt. Roughly 20% of respondents said it was just too costly to sell their homes and move to a bigger or better home because of the monthly debt payments.

In addition, 7% of those surveyed reported bad credit marks as a result of student debt issues and 6% said they were still underwater on their home mortgages. They cited student debt as the reason they are unable to pay more towards their mortgage balance.

With inventory low in the Columbia SC market and home ownership at a dramatic low, the problems that student debt adds to first time home buyers is significant.

Younger homeowners are unable or unwilling to sell and move up and many older homeowners are still housing their adult, college graduate children, preventing them from downsizing. Combine that with an usually low number of homes fro sale in the market and it’s a recipe that has pushed prices upward. Real estate professionals say the market is beginning to show a little resistance to higher prices, but the problems still exist.

See more articles pertaining to home buying tips in the section of articles on Columbia SC Home Buying Tips just below Columbia SC Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter. Check us out there, too.

The Columbia SC real estate market, like most housing markets throughout the U.S., presents a challenge for that segment of the population commonly referred to as “Millennials.” Millennials are generally identified as men and women between the ages of 25-34. Let’s look at the ongoing dilemma many Millennials face in today’s complex real estate environment.

Columbia SC Real Estate: Where Do Millennials Fit?

It wasn’t long ago that home ownership was a goal every red-blooded, hard-working American citizen aspired to achieve. Parents scrimped and saved to provide their children with at least a portion of the down payment needed to buy their first home. Home ownership was viewed as an expectation by some, and a mark of success by others. Being able – or willing – to buy a home was somewhat of a rite of passage, after all, who wants to “throw money away” on rent each month?

Today, more than a few things have changed – no doubt as a result of what a large segment of Millennials have personally experienced – shaping their thoughts, opinions and goals. During the housing crisis of less than a decade ago, millions of Millennials witnessed firsthand the effects foreclosure can have on a family. Even if they weren’t directly affected by rampant foreclosures, they surely know friends or relatives who were. It’s perfectly understandable that for many, the scars associated with the financial battles they and their families faced were both real and memorable.

Couple the housing crash with a recessionary economy and a job market that consistently failed to meet their growing expectations and it’s no wonder many Millennials who probably could be buying homes have opted not to for now.

Columbia SC Real Estate: Statistics

Generation Progress, a national progressive advocacy and action network for young people, recently cited data from the Bureau of Labor Statistics. They expressed an optimistic outlook of the current Millennial labor participation market. Generation Progress said for older Millennials – between the ages of 25-34 – the participation in the U.S. labor force is much higher than the national average. While many Millennials are working again and presumably earning more, the possibility of buying a home is a reality within reach. The question that remains, however, is will they buy?

For many of these potential first-time purchasers, the home buying process is rather daunting. They are finding that a home they can afford now may not fill the bill for their “forever home.” Even though the cozy little two-bedroom starter home is affordable and larger than their one-bedroom apartment, Millennials are pausing to ask themselves, “What happens when we want more room, start a family, or want to move to a nicer neighborhood?” When you’re young, the chances of outgrowing your first home are pretty good. Thus, the Millennial dilemma continues. Should they buy a home they can afford now knowing they will want to move sooner than later, or keep saving for a down payment on a larger home?

Consider this statistic, courtesy of the National Association of Realtors:  “… for the last three years, Generation Y/Millennials (buyers 18 to 35) is the largest share of home buyers at 35%.” So, the good news is a number of Millennials have entered the Columbia SC real estate market and have purchased homes. Let’s take a quick look at the positives and negatives that Millennials still wrestle with.

Columbia SC Real Estate: Positives

Nationwide, home prices are expected to continue to rise through the rest of the year. In addition, mortgage interest rates are still very low – despite rumblings from the Federal Reserve that they won’t stay low. Simply put, it’s a good time to buy a home. The most important thing to consider is compared to next year, today’s Columbia SC real estate market may look like a bargain.

Columbia SC Real Estate: Negatives

While many Millennials may have saved enough money for a sufficient down payment, some may not realize that’s only the beginning of their cash needs. In order to close a home sale they’ll need closing costs, property taxes, homeowners insurance, maintenance, utilities and more. In addition, if they plan to do any remodeling, even painting or re-carpeting, they’ll need additional money.

Experts say maintenance and repairs usually run home owners 1% – 2% of their mortgage costs annually. So, conservatively, if your mortgage is $150,000 that 1% would cost you roughly $1,500 per year, or $125 per month. Another point to consider:  If you move to the suburbs and have formerly been a one-car family, you may now need two cars. Statistics show most Americans spend nearly half of their household income on housing and transportation.

Millennials, like most first-time home buyers will eventually learn their best option may be to buy something now they can get into relatively inexpensively while interest rates are low and prices haven't gone any higher. Then, as the newly-acquired property appreciates they can sell and move up to a larger home – hopefully enjoying the profits of their investment. With soaring rents nationwide, that may be more appealing than continuing to pay rent.

You can find more articles pertaining to real estate news in the Columbia SC Real Estate News section of our site below Columbia SC Real Estate Categories in the column to your right.

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