Here’s a thought on why “Millennials” are not buying houses at the pace of their predecessors, the “Baby Boomers”. Bloomberg notes that College Tuition expenses have jumped 538% since 1985 compared to a 121% increase in the Consumer Price Index and a 286% increase in medical costs during the same period.
The high student loan balances of many college graduates (equivalent to a luxury auto loan or two) and their high repayment schedule, creates a mortgage qualification problem for “Millennials”, which equates to a qualification problem for “first time homebuyers”, which equates to an opportunity problem for “move up buyers”, which equates to a problem for entry level and move up home builders, which equates to a problem for...well, you get the picture.
How much can a psychology, sociology, marketing, elementary or secondary education major expect to earn upon graduation? How many times their annual “take home pay” will their final student loan balances be? What ratio of their gross monthly income?
How much of a mortgage payment will their new employment income qualify for, once you take into consideration a $50,000 student loan payment?
The answer is…not very much.
Something has got to give. Either tuition must come more in line with their value, or many liberal arts colleges must turn into engineering and/or medical professional trade schools, as their graduates appear to be those who are getting jobs.
A liberal arts college education is a luxury, certainly not a right, and no longer comes with the presumption of employability, as it once did.
Millennials….choose your degree carefully.
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