First time homebuyers continue to struggle to enter the housing market amidst limited housing inventory, falling to the fourth lowest level since 1981, according to the National Association of Realtors’ 2017 Profile of Home Buyers and Sellers report.

The share of first time homebuyers in the housing market decreased from 35% in 2016 to 34% in 2017. The in 36-year history of NAR’s report, the long-term average of first-time homebuyers rests at 39%.

“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages, which undercut their ability to become homeowners,” NAR Chief Economist Lawrence Yun said. “With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home.”

“Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers,” Yun said. “Solid economic conditions and millennials in their prime buying years should be translating to a lot more sales to first-timers, but the unfortunate reality is that the nation’s homeownership rate will remain suppressed until entry-level supply conditions increase enough to improve overall affordability.”

But besides low inventory, other factors are also working against young potential homeowners, including student debt.

While student debt has been around for a long time over multiple generations, college tuition costs have become so high, that getting a job and working your way through is simply no longer possible.

Back in 1993, 47% of college students graduated with student debt of about $9,450 per grad, according to the Federal Reserve Board of New York. As of 2012, that number surged to 71% of college graduates, and in 2016 the average loan amount totaled a shocking $37,172 per graduate.

NAR’s study showed 41% of first time homebuyers held student debt of $29,000 in 2017, up from 40% of buyers with $26,000 in debt in 2016. And while only 41% had student debt while buying their home, 55% of first-time buyers said student debt delayed saving for their home purchase.

Why the surge? Did college students suddenly stop working and rely more heavily on student loans? Actually, as of 2014, undergraduate education cost 12 times more than it did 35 years before, far outpacing inflation. The price of college tuition and fees surged 1,122% since 1978 while the cost of medical care increased 600%, and housing and food increased 300%. To be sure, incomes are also rising [charts available here], but not at a rate to counter the inflation surge.

Therefore, naturally, student loans are also outpacing other forms of debt, as seen in the chart below.

 

In short, it should come as no surprise that first-time homebuyers continue to decrease lower than historical norms.

“NAR survey findings on student debt released earlier this fall revealed that an overwhelming majority of millennials with student debt believe it’s delaying their ability to buy a home, and typically for seven years,” Yun said. “Even in markets with a plethora of job opportunities and higher pay, steep rents and home prices make it extremely difficult to put savings aside for a down payment.”

However, in 2015, TransUnion announced the results of its study which seemed to show student loans have absolutely no impact on housing.

Another study from Fannie Mae showed that student debt does, in fact, delay homeownership, however college grads are much more likely to become homeowners at some point than those who don’t attend college.

And homebuyers are also starting to utilize more low down payment options as the average down payment dropped to 5% this year, down from 6% in 2016, matching the lowest down payment rate since 2013.