According to a recent report from RealtyTrac®, the nation’s leading source for comprehensive housing data, 96 percent of the housing markets in the United States are still affordable for recent college graduates with student loan debt. However, it was also noted in the study that college graduates with loan debt will need a 34 percent higher income to purchase a median priced home.
The report analyzed the affordability of owning a home for recent college graduates using a variety of data points. RealtyTrac® used median home price data collected from public records and average student loan debt by state date supplied from the Institute for College Access & Success. By examining this data, RealtyTrac® was able to determine the minimum amount of income needed to purchase a median priced home for graduates both with and without student loan debt. The report examined 494 counties throughout the United States that each had a population of at least 100,000.
Out of the 494 counties examined, the report found that in 475 counties (96 percent), recent college graduates making the median income and having the average student loan debt for that state could still afford to buy a median priced home. For the purposes of this report, affordable was considered up to a maximum of 43 percent of income spent on the housing payment (including taxes and insurance), assuming a 20 percent down payment and a 30-year loan with 4.13 percent fixed interest rate.
“Contrary to much rampant speculation that student loan debt is holding back homeownership among recent graduates, we found that the vast majority of markets are affordable for recent graduates making the median household income — even many of those recent graduates with student loans,” said Daren Blomquist, vice president at RealtyTrac. “However, student loans still represent a significant handicap for recent graduates in terms of the minimum income needed to buy a median priced home. Nationwide, recent graduates with student loans need to earn 34 percent more ($8,969) than recent graduates without student loans to be able to afford a median-priced home.”
The average U.S. median home price in June 2014 was $187,000, while the average student loan balance was $29,400. The 2014 estimated median household income in the U.S. is $52,912. For those recent college graduates without student loan debt to purchase a median priced home, they would need a minimum household income of just $26,291. However, students with loan debt would need a minimum household income of $35,259, or 34.1 percent higher earnings.
By comparison, the state of Georgia’s median home price in June 2014 was $149,000, while the average student loan balance was $23,089. This year’s estimated median household income for the state is $48,670. According to RealtyTrac’s® report, this means that the minimum household income needed to buy a median priced home without student loan debt is just $20,948, while graduates with student loan debt would need to earn $27,991. This means that graduates with debt will need to earn 33.6 percent more income per year than those graduates without student loan debt.
This new report from RealtyTrac® highlights the fact that housing is becoming even more affordable for those groups who previously thought homeownership was unattainable.