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Student Debt Reduces Buyers' Budgets by Nearly $100,000

About a third of renters who plan to buy a home in the next year are carrying student debt

- The average monthly student debt payment for renters who are planning to buy a home in the next 12 months is $388.

- The highest priced home a renter with student debt could afford without spending more than 30 percent of their income on housing and student debt is $269,400, meaning they could buy just over half of the homes currently for sale.

- A renter without student debt could afford to buy a home that costs up to $361,800, or 66.4 percent of available homes.

Nov 15, 2018

SEATTLE, Nov. 15, 2018 /PRNewswire/ -- Carrying student debt, whether for themselves or someone else, limits potential home buyers' budgets by $92,440, leaving fewer homes on the market they can afford.

The average monthly student debt payment for renters who plan to buy a home in the next year is $388, according to the Zillow® Housing Aspirations Report. The maximum priced home a buyer with student debt could afford is $269,400, if they spend no more than 30 percent of their income on combined housing and student debti. At this price point, they could buy 52.3 percent of homes currently listed for sale.

For a buyer with no student debt seeking to spend the same share of income, the buying limit would increase to $361,800, and they could afford to buy 66.4 percent of available homes nationwide.

Student debt reached record levels this year, with the total amount at $1.56 trillion in the third quarter of 2018ii. Paying off student loans also makes it harder to set aside money for a down payment, which is one of the top barriers to homeownershipiii. And saving for that down payment takes longer than it did for previous generationsiv.

"Higher education pays off when it comes to lifetime earnings and the long-term odds of homeownership, but carrying any kind of debt limits how much home buyers can afford. For today's generation of young home buyers, who came of age in a period of rapidly rising education costs, student debt payments can delay the pace of down payment savings and put a dent in their max price point once they do decide to buy," said Zillow Senior Economist Aaron Terrazas. "With for-sale supply still tightest for the most affordable homes but increasingly available at higher prices, even a small reduction in a buyer's target price point can result in substantially fewer options."

Nationwide, about one third (33.9 percent) of renters who are planning to buy a home in the next year have some form of student debt, whether it is for themselves or someone else.

Student debt plays the biggest role in housing affordability in Las Vegas, where buyers with no student debt can afford a much larger share of the homes for sale than those with student debt (57 percent versus 29.3 percent, respectively).

It makes the smallest difference in San Jose, California, where buyers with student debt can afford 11.7 percent of homes, compared with the 18.3 percent of homes that shoppers free from student debt can buy. 

Metropolitan Area

Max Home
Price,
Average
Student
Debt

Share of
Listings
Affordable
with
Student
Debt

Max
Home
Price, No
Student
Debt

Share of
Listings
Affordable,
No Student
Debt

Median Home
Value,
September

2018

United States

$ 269,400

52.3%

$ 361,800

66.4%

$ 220,100

New York, NY

$ 357,300

29.4%

$ 449,700

40.9%

$ 431,000

Los Angeles-Long Beach-
Anaheim, CA

$ 326,700

6.3%

$ 419,200

13.5%

$ 647,100

Chicago, IL

$ 320,500

58.8%

$ 413,000

71.9%

$ 222,200

Dallas-Fort Worth, TX

$ 308,700

45.0%

$ 401,100

64.0%

$ 233,200

Philadelphia, PA

$ 320,500

68.6%

$ 413,000

79.3%

$ 229,300

Houston, TX

$ 292,200

48.1%

$ 384,600

65.3%

$ 200,900

Washington, DC

$ 507,600

62.0%

$ 600,000

71.1%

$ 401,000

Miami-Fort Lauderdale, FL

$ 227,900

21.4%

$ 320,300

38.3%

$ 278,400

Atlanta, GA

$ 300,400

52.3%

$ 392,800

66.8%

$ 209,700

Boston, MA

$ 423,500

38.1%

$ 515,900

51.0%

$ 458,000

San Francisco, CA

$ 528,000

16.4%

$ 620,500

26.0%

$ 961,200

Detroit, MI

$ 257,900

62.0%

$ 350,400

76.1%

$ 157,200

Riverside, CA

$ 276,000

29.0%

$ 368,400

49.4%

$ 362,000

Phoenix, AZ

$ 276,700

40.3%

$ 369,100

60.5%

$ 258,300

Seattle, WA

$ 410,100

33.8%

$ 502,500

48.5%

$ 486,600

Minneapolis-St Paul, MN

$ 365,800

60.7%

$ 458,200

73.3%

$ 263,300

San Diego, CA

$ 357,800

9.7%

$ 450,300

20.2%

$ 589,200

St. Louis, MO

$ 281,300

73.3%

$ 373,800

82.9%

$ 163,100

Tampa, FL

$ 227,900

43.9%

$ 320,300

65.4%

$ 208,400

Baltimore, MD

$ 392,500

67.2%

$ 484,900

77.0%

$ 265,600

Denver, CO

$ 365,800

32.0%

$ 458,300

50.6%

$ 398,400

Pittsburgh, PA

$ 260,300

72.6%

$ 352,700

82.7%

$ 142,300

Portland, OR

$ 345,800

26.2%

$ 438,200

46.8%

$ 391,400

Charlotte, NC

$ 286,400

44.4%

$ 378,800

62.5%

$ 199,400

Sacramento, CA

$ 313,900

24.3%

$ 406,400

44.5%

$ 400,600

San Antonio, TX

$ 259,300

54.4%

$ 351,800

71.5%

$ 187,800

Orlando, FL

$ 235,800

34.7%

$ 328,200

59.0%

$ 231,000

Cincinnati, OH

$ 284,800

66.1%

$ 377,200

78.8%

$ 164,500

Cleveland, OH

$ 232,600

69.8%

$ 325,000

81.9%

$ 142,700

Kansas City, MO

$ 291,900

61.8%

$ 384,400

76.3%

$ 185,500

Las Vegas, NV

$ 251,400

29.3%

$ 343,900

57.0%

$ 273,800

Columbus, OH

$ 284,500

58.4%

$ 376,900

71.0%

$ 184,200

Indianapolis, IN

$ 263,400

63.3%

$ 355,900

76.6%

$ 157,200

San Jose, CA

$ 610,800

11.7%

$ 703,200

18.3%

$ 1,288,700

Austin, TX

$ 356,800

52.5%

$ 449,300

66.7%

$ 300,600

Zillow

Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

i This analysis assumes a 20 percent down payment and 30-year fixed rate mortgage at a 4.8 percent rate. 
ii https://www.federalreserve.gov/releases/g19/HIST/cc_hist_memo_levels.html 
iii https://www.zillow.com/research/down-payment-hurdle-zhar-14790/ 
iv https://www.zillow.com/research/how-many-years-down-payment-21734/

 

SOURCE Zillow

For further information: Lauren Braun, Zillow, press@zillow.com


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