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Student debt hinders millennial homeownership
- babyslothzoo 8y agoSource study minus the regurgitation: https://www.federalreserve.gov/publications/files/consumer-community-context-201901.pdf?mod=article_inline https://www.federalreserve.gov/publications/files/consumer-c... And a better summary, if you'd prefer an article: https://www.bloomberg.com/news/articles/2019-01-16/high-student-debt-is-driving-low-millennial-homeownership-rates https://www.bloomberg.com/news/articles/2019-01-16/high-stud...
- greggeter 8y agoFree, easy money for low-return degrees wrecks more than just the ability to buy a house.
- ZeroFries 8y agoThe crazy cost of real estate is far more hindering IMO. Average student around here is 25k. Average house (detached) price is over 1.3 million. Toronto area, for reference.
- eli_gottlieb 8y agoSimilar here in Boston. Your average two-bedroom apartment/condo costs... what was it, $350k-$500k, depending on the area. YIMBY or bust.
- rch 8y agoWe have a strong YIMBY movement going in Boulder, but I've never seen a model based estimate of how many additional housing units would be necessary to actually lower the cost of individual ownership.
- jseliger 8y agoYou don't need a model; you have a market. Remove height limits and parking minimums and we will fairly rapidly find out how many units are necessary to bring rents in line with cost of construction.
- souprock 8y agoThat doesn't just increase supply. It also reduces demand. There may be a billion people who would move there now if they could afford it. The additional units required to get things into the affordable price range would degrade the experience though, causing most people to reject the result. So what this accomplishes is the destruction of a desirable place to be. The smaller buildings and easier parking are inherently part of the desirability. Even the exclusiveness itself is part of the desirability.
- zip1234 8y agoPerhaps getting rid of height limits entirely isn't a great idea, but an overall height limit that allows building up to one story taller than the buildings next to the one you are building seems reasonable and would allow a city to grow up gradually. As far as desirability--what makes European cities desirable and charming? I'm certain it is NOT ample parking or one story bungalows with huge yards.
- eli_gottlieb 8y ago>The smaller buildings and easier parking are inherently part of the desirability. Even the exclusiveness itself is part of the desirability. For you, maybe.
- rch 8y agoI've seen plenty of sophisticated models that developers use to answer this type of question. Why can't we have the same level of effort applied to the problem of housing accessibility?
- Spooky23 8y agoAverages hide alot. Most of my friends who went to private colleges (graduation 1998-2002) left with ~$100k in student loans. At that time, "sticker price" was $25-30k. I was fortunate to attend a state school before the tuition exploded.
- admax88q 8y ago> Average house (detached) price is over 1.3 million. The popularity of wanting to live in Toronto makes detached housing for everyone who wants it untenable. There just isn't enough space.
- jseliger 8y agoThe popularity of wanting to live in Toronto makes detached housing for everyone who wants it untenable. There just isn't enough space. There is plenty of "space;" Toronto, like many municipalities, just makes increasing the housing supply illegal: https://www.vox.com/policy-and-politics/2018/9/24/17896482/building-more-stuff-housing-gentrification-cities https://www.vox.com/policy-and-politics/2018/9/24/17896482/b.... When supply is restricted in the face of rising demand, prices rise. This is what existing owners want: http://cityobservatory.org/homevoters-v-the-growth-machine/ http://cityobservatory.org/homevoters-v-the-growth-machine/ and that's why we're getting it. Baby boomers are, sometimes literally, forcing their own children out of the city.
- admax88q 8y agoThat's a problem for sure, but my point is that regardless is you cannot physically increasing the housing supply of _singly detached houses_ in Toronto or similar cities, regardless of policy.
- shados 8y agoYeah, a lot of articles and studies quote single family detached homes, while referring to high density, high demand areas where those things basically don't exist. The cost of a 2 bedroom single family in Manhattan is not a very interesting metric.
- deadmetheny 8y agoHome ownership isn't realistic in every market, especially ones in which there's such huge demand. The easy answer to this is living somewhere with low real estate costs (e.g. the Midwest US) instead of massively over-saturated markets.
- romwell 8y agoSure, the easy answer is to save up a few grand (when you don't have money to begin with) to move into an area where there are job little opportunities. That's easy, even easier if you have a partner or a family. The #1 reason why in-demand markets are that way is jobs. Moving out of these areas is not an easy answer.
- deadmetheny 8y agoThere's plenty of opportunities around that pay enough to afford real estate. They won't be as sexy, pay as well as the coasts (the lower COL helps to offset this), or likely to be working on cutting edge problems, so if you're looking for that kind of work you're not gonna have much luck. To say there's nothing anywhere outside of major cities at all is misinformed.
- zaccus 8y agoPlaces with low real estate costs tend to have fewer and lower-paying jobs. Part of me would love to move back to KY where I'm from, but where would I work? That's the reason I left in the first place, no good jobs.
- souprock 8y agoThe places that pop into mind are Lexmark, Big Ass Fans, Lockheed Martin, General Dynamics, and Johnson Controls. There are lots of smallish places doing factory automation, particularly near the Toyota factory. Salary seldom keeps up with real estate costs. The real estate cost difference can be a factor of 10, but you won't see that difference for salary. Lots of low-cost areas will specialize in an industry. You shouldn't expect to pick a random low-cost area and find the industry you want, but the industry you want is probably in at least one low-cost area. Find that area, move there, and do well in life.
- NathanCH 8y agoBut why would you compare a student salary with the most expensive type of property you can find?
- diminoten 8y agoIf you want to buy a home and can't where you are, change where you are! I know it sounds obvious, but if you haven't looked into it in the past year, I think you'll find it's easier now more than ever to manage the (admittedly many) logistics of finding a new area for yourself and your family. Tons of tools for each aspect.
- randomacct3847 8y agoAt the time, I was mad at my parents for forcing me to go to my public in state college instead of going out of state to a UC or USC. Now I’m so relieved that I have no debt from undergrad and a small low interest fed loan for my grad degree.
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- iambateman 8y agoWe need to add some nuance to the way we talk about student debt. My wife and I had $120,000 in student loans, which we were fortunately able to pay it off in 36 months. Granted, we didn’t do much else. University degreees are not created equal. Having six figures of debt isn’t a problem if you have a reasonable expectation to have six figures of income. On the other hand, my cousin went to a private liberal arts college for a $90,000 Communications degree before returning to RadioShack. He may never pay his loans off. Student loans become a problem when they are used to subsidize high-tuition schools teaching skills which don’t connect to a wage-premium.
- Shivetya 8y agothe elephant in the room is that we should not provide loans for all educations. the other consideration is the when the government provides the loans it should restrict how much each course credit should cost, how many credits are needed for the degree and which classes those credits can comprise of. This would also put limits onto the cost of required course materials, namely text books and the like. many don't seem to take issue the government setting rates with hospitals and considering the costs involved it should do so with college level education. many colleges would trip over themselves to offer degree programs fitting within the limits provided. Yes there will be moans and groans, end of the world declarations, but the free ride on the backs of students who have the federal loan programs to fall back onto needs to stop.
- ucaetano 8y agoYep, the hidden fact of student loans is that the ones struggling to pay it off most often aren't the ones with $100k+ in student loans. Those usually graduated from a mid to top tier school with a marketable degree, and won't have many issues paying the loans. The ones struggling usually have lower amounts, and got leo-marketability degrees from for-profit or low-tier schools. http://fortune.com/2015/12/01/student-loan-delinquent/ http://fortune.com/2015/12/01/student-loan-delinquent/ https://equitablegrowth.org/an-introduction-to-the-geography-of-student-debt/ https://equitablegrowth.org/an-introduction-to-the-geography... But this doesn't mean that there isn't a problem. There is one, it is massive, and it is bad for society.
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- asabjorn 8y agoSo the three largest problems for millenials: - large and increasing cost of housing due to artificial restrictions of housing through zoning and housing permitting - large and increasing cost of education due to subsidized education with no cost control of the product, leading to bloat in administration and unnecessary spending at universities [cost increase is both monetary and in time due to grade inflation] - opportunities are increasingly centered in jobs and cities where the two previous problems are aggravated the most Neither of these are productive uses of the amount of debt millenials accrue for this purpose. University education is mostly signaling that you are conscientious, smart enough and execute an imposed set of tasks over an extended period of time [1]. The book in the link argue although an individual benefit from graduating at a good college the society as a whole does not get extra value from more people needing a college education to get a job. Maybe we could get a cheaper signal for this? When buying a home housing has the main purpose of sheltering a family. Short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners [2]. With decreasing birth rates that is already below replacement in the west making it impossible for most to buy and making rent crazy high seem like an incredibly short sighted idea. [1] https://www.amazon.com/Case-against-Education-System-Waste/dp/0691174652 https://www.amazon.com/Case-against-Education-System-Waste/d... [2] https://www.nber.org/papers/w17485 https://www.nber.org/papers/w17485 Edit: added extra info on education having a time cost. This is Peter Thiels long-standing point.
- pkaler 8y agoExclusionary zoning and high university administrative costs are basically a transfer of wealth from millennials to baby boomers.
- asabjorn 8y agoThe student loan bonds probably benefit the ones owning them the most, which is not baby boomers in general. Maybe retirement funds buy them so they indirectly benefit? Exclusionary zoning benefit those that own housing the most, so it does benefit a bunch of baby boomers. However, those with leverage of existing rental units seem to benefit the most because they gain leverage through rental income in the same market as they buy new units in so they can slowly gain new low-risk wealth over time without changing their cost/revenue balance. In general low-risk investments such as student loan bonds and rental properties should be low-margin. However, due to regulations that stop the market from doing its thing that is not the case.
- LarryDarrell 8y agoAnecdotal, but I don't know anyone my age that has a house that didn't get their college paid for or had significant down payment help from their parents. Every one else has started to view the world with pinko-commie lenses. I'm genuinely amused at the confusion this causes to the people I talk to who are at the end of their careers. This really ought to be scaring the upper 20%, but I guess it's hard to feel the heat when the system is working for you.
- gnicholas 8y agoI see much of the same thing. All of my neighbors who bought homes before turning 35 grew up in Atherton and presumably had help from their parents (or at the least, didn't have any student debt).
- ethanwillis 8y agoI'm 27, I bought my house when I was 22. I received no down payment assistance from my parents, in fact my parents were actively stealing money from me. I also had a boatload of student debt, still do. Now what I did do, was take advantage of government programs that were and still are in place to qualify for an FHA backed mortgage loan. My mortgage is $640/mo roughly while my peers see their rent increase massively year over year..
- danielvf 8y agoYeah, I had no help with a down payment nor college payment help, and bought around the same age. And I know plenty others young couples and singles who have done the same thing. I’m guessing the effect the grandparent is seing is in high cost of living, coastal cities. It’s certainly not the norm across the US.
- smush 8y agoNot to pile on, but I also managed to buy a house at 22 after paying off my student loans, and I'm not alone in it by any stretch where I am. Pet theory with zero evidence attempted : Geography really does affect one's filter bubble / worldview more than we've explored. Edit: with no down payment or student loan assistance from guardians.