Likely Culprit: Exploding Student Debt
“Economists believe younger Americans now are much more likely to rent for longer periods than did earlier generations ” due not only to the rising home prices and high credit standards but also the high student debt levels and elevated levels of underemployment.”
—Wall Street Journal (5/23/2014)
With the caveat that you should always take with a grain of salt any paragraph that begins, “economists believe . . . ,” I think the WSJ is on to something.
A decade ago, cumulative student debt was around $200 billion.
Today, that number is approximately $1.2 trillion.
Divide that extra $1 trillion of debt by $150k — enough to buy a starter home (or condo or townhome) in most U.S. cities, and you get almost 6.7 million mortgages.
Think another 6.7 million home buyers wouldn’t have a salutary effect on the U.S. housing market?
Put it this way: that’s more than the number of existing and new homes sold last year, combined (5 million and 450k, respectively).
