New and troubling statistics by the National Association of Realtors show that first-time home buyers have been playing a smaller role in the housing market. It has long been assumed that these buyers were challenged by tougher credit score requirements and other factors that have made mortgages more difficult to obtain. However, new data suggests that there is another root cause behind the diminishing number of first-time buyers – skyrocketing student debt.
First-Time Home Buyer Numbers Fall Nationwide
According to the National Association of Realtors, first-time home buyers typically represent about 40% of home sales. But between 2008 and 2012, they have accounted for only 30% to 35% of the market. This means there were 2.2. million fewer home buyers over a four-year period.
First-time home buyers are an important force in the market, as they generally purchase entry-level homes, facilitating “trade up” activity. In recent years, the decline of first-time home buyers may have escaped notice due to the amount of cash buyers and investors who have swept in to obtain the entry-level inventory.
In the past few months, first-time home buyers have accounted for only 30% of the market, even while mortgage interest rates have remained at historic lows.
Growing Student Loan Debt Impacts Ohio Home Buyers
Nationally, outstanding student loan debt has reached 1 trillion dollars, according to an article in The Columbus Dispatch. It states that individual student debt loads range from an average of $23,300, to $54,000. About 3% of graduates carry student loan debt of $100,000 or more.
Ohio graduates reportedly have some of the highest student loan burdens in the nation. From 2001 to 2011, state college tuition and fees increased by 72% as tax dollars were diverted elsewhere. Private schools and for-profit colleges offer some of the most expensive educations, and federal student loans have kept the class doors open to all. But the enormous debt load and high monthly payments that follow students after graduation can make home ownership difficult.
This is because mortgage lenders must consider student loan payments in debt-to-income calculations. Debt-to-income ratios usually cannot exceed 43%. High student loan payments can tilt the scales in the wrong direction, even if the home buyer has little other debt.
Columbus Home Buying Help is Available!
If you have more than one student loan, you may be able to consolidate them to reduce interest expense and improve your monthly cash flow. If you are overwhelmed with monthly bills, ask your student loan servicer about a temporary forbearance, which gives you permission to suspend student loan payments without penalty. Deferments may be available in cases of hardship.
Home buyers with student loan balances should be wary of increasing their debt obligations in other areas, tempting as that new car may be. You may need to trim other costs to compensate for the student loan’s impact to your debt-to-income ratio, and minimize your expenses across the board.
We can help you buy referring you to trustworthy mortgage professionals who will look at your situation and provide sound advice. As your Exclusive Buyer’s Broker, we are always ready to help first-time home buyers in Columbus!
At Buyer’s Resource Realty Services, we exclusively represent Columbus home buyers and protect their interests. From consultation to closing, we will be with you every step of the way! We invite you to get started now and download our free e-book for a wealth of home buying tips and strategies!
Contact us for help with your home buying questions!
Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax
