CBRE: Student Debt Woes Driving Multifamily Market
High levels of college student debt are delaying homebuying and keeping young adults in multifamily housing longer than past generations, according to a U.S. Multifamily Research Brief from CBRE.
CBRE’s senior research analyst George Entis reports that delayed homebuying is helping to sustain high levels of multifamily demand.
Over the past decade, the total amount of student loans has more than doubled. In 2019, the total amount of loans reached $1.5 trillion. In addition, 65% of college graduates in 2018 had student debt.
In 2019, the average amount of student debt per loan recipient grew to $35,000, which is $8,000 more than the average home down payment.
These unprecedented levels of student debt have challenged young adults’ ability to spend, save and accumulate assets, according to CBRE.
The National Association of Realtors recently found that roughly 25% of millennial homebuyers reported saving for a down payment was the most difficult task in the buying process. Further, of homebuyers younger than 35 years old, 60% indicated that debt is the biggest impediment to saving for a down payment.
The NAR survey also found that the most common reason a prospective homebuyer gets turned down for a mortgage is a debt-to-income ratio that is too high.
Homeownership rates in the millennial and Gen Z segments are growing, reports CBRE, but many young adults remain limited by rising home prices and small inventories, especially for lower priced homes. The burden of student loans has made homeownership for most in the segment a far more distant goal.
However, CBRE reports that this phenomenon is largely positive for the multifamily housing market. High levels of student debt have contributed to sustained high levels of multifamily demand over the past decade plus.
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