Cities Where a Degree Hurts Your Chances of Owning a House

In some cities, not having a college degree actually enhances your ability to save for a down payment, a study finds.

Cities Where a Degree Hurts Your Chances of Owning a House Photo (cc) by Moyan_Brenn

Old financial obligations may keep some college graduates from putting down new roots.

Student-loan debt in the U.S. — which now amounts to more than $1 trillion, according to the Consumer Financial Protection Bureau — is delaying some graduates from making a down payment on their first home, according to research from real estate website Trulia.

Trulia housing economist Ralph McLaughlin tells Yahoo Finance:

“A lot of people tend to think that having a college degree means you’ll be able to save for a home much faster because you’re making more money. But the trade-off is that if you go to college, you’ll likely have student loan payments. And those student loan payments can keep you, delay you, from saving up for a down payment on a home.”

Trulia found that in some cities, millennials should be able to save up for a 20 percent down payment in a “reasonable time,” regardless of whether or not they have a college degree.

Detroit tops this list, which is dominated by Ohio cities that include Akron, Dayton, Cleveland and Toledo.

In some cities, however, millennials without a degree actually can save up for a down payment faster than their peers in debt-ridden, college-educated households.

Such metro areas include Columbia, South Carolina; El Paso, Texas; and Las Vegas.

In those three cities, households of 25- to 30-year-olds with no degree can save up for a down payment at least 18 months faster than degree-holding households in that age range.

However, Trulia found that in many larger cities, having a college degree is still the ticket to homeownership.

Why the difference? Trulia found that the income boost a worker gets from a college degree is somewhat muted in cities with modest median incomes such as Columbia, El Paso and Las Vegas.

In contrast, having a college degree gives you a bigger income boost in many major cities. That fact can compensate for the greater debt loads of college-educated households.

By enabling a higher income, a degree enhances your ability to save up for a down payment in those larger cities, particularly in California metros such as Los Angeles and San Francisco, according to Trulia.

However, Trulia notes, it likely will take graduates a long time, even decades, to save up the required down payment in big cities where housing prices are very high.

Are you surprised by any of these findings? Let us know what you think by leaving a comment below or on our Facebook page.

Comments

974 Active Deals

More Deals