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.
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