Real Estate

Zillow: Over half of renters blame student debt for delay in buying a home

Almost a third of Gen Z and Millennials are turned down for home financing due to debt

In a paper released at the beginning of this year, the Federal Reserve estimated that about 20% of the decline in homeownership among young adults could be attributed to increased student loan debts since 2005.

Based on the 2019 Zillow Group Report on Consumer Housing Trends released on Monday, that percentage may be a little low. 

The report surveyed 13,000 U.S. household decision-makers about their homes, including how they search for them, pay for them and what challenges they encounter along the way. Among these findings, there was a recurrent topic of debt holding back potential buyers. From medical and credit card debt to student loans, an increasing amount of Americans are putting off buying a home.

“More than two-thirds of renters have debt, and about a quarter of renters and homebuyers said their debt caused them to be denied either a rental agreement or a mortgage at some point. That impact was most commonly reported by those with medical debt, which has a unique capacity to bust budgets,” the report stated.

Specifically, half of renters and almost 40% of buyers surveyed said student debt caused them to delay buying a home. Not surprisingly, this factor weighs most heavily on younger generations, including Millennials and Gen Z, especially when trying to qualify for a loan.

“32% of Gen Z and millennial buyers said their debt caused them to be turned down for home financing, compared to 25% of Gen X and 8% of Boomer and Silent Generation buyers,” the report said. 

Beyond student debt, the report found that medical debt is causing renters to further put off buying a home. Of those surveyed, 63% of renters with medical debt said they couldn’t cover an unforeseen $1,000 expense. 

“When we focus on low unemployment and the strong economy, we often forget that in many ways the rising costs of life can erode most of those gains,” said Skylar Olsen, Zillow’s director of economic research.

“Health care has never been more expensive. Getting a college degree, a path more likely to lead to economic success for those able to get through it, has never been more expensive,” Olsen added. “U.S. housing values and rents have never been more expensive. While incomes, both at the high and low end, are growing, the pace hasn’t kept up with those crucial life expenses. That’s fact and Americans are feeling it.”

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