The recent order by President Joe Biden canceling tens of millions of dollars in student loan debt is good news for the real estate industry, according to a new report.
While many millennials already own homes, student loans forgiveness could play a role in increasing rates of millennial homeownership.
According to a survey by Rocket Mortgage, 64.3% of millennials haven’t paid off their student loans. While these loans won’t necessarily prevent them from buying homes, they contribute to financial insecurity that can prevent millennials from taking the leap into homeownership.
The U.S. Census Bureau reports that when it comes to millennial borrowers, 56.8% own homes. However, 55.9% of those in this group are still making payments on their student loans. Given the fact that millennials took out a median of $40,000 to $60,000 to pay for school, that’s a significant financial barrier.
Homeownership has always been higher among student loan borrowers, likely due to higher education and income levels. Rocket Mortgage also reported that of millennial borrowers who own homes, nearly 50% bought their homes during the period after the Great Recession. Surplus housing, low interest rates and down-payment assistance plans allowed many millennial borrowers to purchase homes regardless of their student loan status.
This number has decreased significantly in recent years, thanks to the competitive housing market and the COVID-19 pandemic. However, 63% of home purchases between 2020 and 2022 were still made by millennials with outstanding student loans — indicating that the pause on student loan payments has given many millennials the opportunity to save for homes.
The question at hand is how eliminating student debt may influence millennial homebuying. Rocket Mortgage found that 19.2% of millennials who think they won’t buy a home simply don’t believe they can afford it.
While many millennials are still planning on buying homes regardless of whether their student loans are forgiven, nearly 70% of millennial borrowers believe they could achieve their dream of homeownership years sooner if student loan forgiveness becomes a reality.
Rocket Mortgage also found that the concept of student loan forgiveness doesn’t impact the amount millennials plan to spend on houses.