Lunch & Learn: Are appraisals the next big opportunity in mortgage fulfillment?

This Lunch & Learn for mortgage lenders will explore the evolution of the appraisal process as well as opportunities for innovation.

HousingWire Annual Virtual Summit

LAST CHANCE! Join us TODAY for a virtual recap of HousingWire Annual 2021! We will be streaming sessions and demos from our in-person event! Register now for content on all things housing!

Keep Up With the Latest Third Party Origination News

Want to stay up to date with the latest on the third party origination front? We designed a specific news hub with lenders and brokers in mind, with Rocket Pro TPO leading the discussion.

How to increase minority homeownership?

Today’s HousingWire Daily features a roundtable discussion from HousingWire’s Lunch & Learn series that looks at “Unpacking the lender’s vital role in increasing minority homeownership.”

Investments

Student debt costs housing $83B a year

Analysts: Skyrocketing higher ed costs create enormous drag

For more than a year HousingWire has been reporting on the link between high levels of student loan debt and the struggling housing recovery.

Now John Burns Real Estate Consulting has quantified the true measure of this dismal reality: Student debt will cost the housing industry approximately $83 billion in sales in 2014.

With college debt increasing by about 6% every year, there is every reason to believe this trend will continue, and probably worsen, the firm reports. 

Their report estimates that heavy college debt will reduce real estate sales by 8% for this year, and that households that pay $750 or more for college loan debt each month are priced out of the housing market entirely.

Given how important debt-to-income ratios are now with the Qualified Mortgage rules.

Another recent study found that when parsing mortgage applications of those with student loan debt, approved borrowers had monthly college loan payments of about $300.

Mortgage applicants paying nearly $500 per month, however, were usually denied.

Click to enlarge

Source: John Burns Real Estate Consulting

“The analysis was quite complicated and involved a few assumptions, but we believe it is conservative, primarily because we looked only at those under the age of 40 with student debt,” analysts Rick Palacios Jr. and Ali Wolf wrote.

Here is the math:

Student debt has ballooned from $241 billion to $1.1 trillion in just 11 years.

29 million of the 86 million people aged 20–39 have some student debt.

Those 29 million individuals translate to 16.8 million households.

Of the 16.8 million households, 5.9 million (or 35%) pay more than $250 per month in student loans, which inhibits at least $44,000 per year in mortgage capability for each of them.

About 8% of the 20–39 age cohort usually buys a home each year, which would be 1.35 million transactions per year.

“Using previous academic literature as a benchmark for our own complicated calculation, we then estimated that today's purchase rate is reduced from the normal 8% depending on the level of student debt—ranging from 6.9% for those paying less than $100 per month in student loans to less than 1% for those paying over $1,300 per month. Other factors contribute to even less entry-level buying today,” they wrote.

John Burns Real Estate Consulting raised the red flag on student debt back in 2011 and continues to believe that this debt will delay homeownership for many, or at least require that they buy a less expensive home.

Most Popular Articles

FHFA to make desktop appraisals permanent

Desktop appraisals, a temporary flexibility implemented in March 2020 amid lockdowns and social distancing, will become permanent, the FHFA said today.

Oct 18, 2021 By

Latest Articles

Why brokerages and mortgage lenders are rushing into JVs

Joint ventures are suddenly stitched into the fabric of a handful of national brokerages. But the idea of the joint venture collides with the loose, informal networks that color the American housing economy. HW+ Premium Content

Oct 25, 2021 By and
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please