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.

News provided by

Zillow

Nov 15, 2018, 08:00 ET

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 generations^iv.

"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.

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

SOURCE Zillow