Student debt, lack of affordable homes delays first-time buyers

High student loan debts and a lack of affordable houses are responsible for a nearly 36-year low in the number of Americans buying their first home, a new real estate report says.

First-time buyers have accounted for around 34 percent of home sales this year, the lowest share since 1981, according to a new report from the National Association of Realtors.

Many first-time buyers either can’t find what they’re looking for or are so saddled with student debt they can’t afford a home in what is currently a highly-competitive “seller’s market,” experts told this news organization.

To lock down a home that’s for sale — especially a cheaper one — buyers often must come up with a 20 percent downpayment and make an offer that’s above the seller’s asking price, said Karen O’Grady, president of the Dayton Area Board of Realtors and a Realtor at Coldwell Banker.

That can be a difficult reality for a first-time home buyer to accept, she said.

“Try to get a first-time homebuyer to believe you when you say you’ve got to make an offer now and you’ve got to make it for at least $500 over list,” O’Grady said. “They’re losing a lot (of homes) because they’re going through homebuyer shock. They’re entering into the market at the worst time they can enter it.”

The most recent monthly report from the Dayton Area Board of Realtors said home sale prices in September were up about 5 percent over last year, with an average price of $159,699.

‘Sellers market’

On top of having to pay more, first-time buyers are having to make quick decisions, O’Grady said, sometimes hours after seeing a home for the first time.

Alina Hutcheson, 45, of Dayton said she found herself in a similar situation in 2015. Everytime she found a house she liked, it ended up getting sold right away.

Hutcheson eventually landed the home she wanted but had to offer $2,000 over the asking price of $156,400, she said.

“We noticed very quickly it was a sellers market,” she said.

She said she sympathizes with recent college graduates who are not only facing high college loan debts, but also rising prices in the housing market.

High student debts

The average time to buy a home after college is now seven years, according to the National Association of Realtors, as more graduates put off buying a home until they can pay down on their student loans.

Around 41 percent of first-time home buyers have student debt of around $29,000 on average, NAR reported.

High student debts are a common issue first-time buyers face when trying to get a mortgage, said Patti Stoll, manager of PNC Bank’s wealth management team in Dayton.

She has advice for those wishing to buy a home while still paying on their college loans: Take small steps.

“I think it is easy to go off course and purchase something you don’t really need, especially in the very beginning,” Stoll said. “Take small steps, prioritize, plan and don’t think that those small steps in the future won’t mean anything.”

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By the numbers

34: Percentage of people who bought homes this year who were first-time buyers.

36: Number of years since the percentage of first-time buyers was that small.

41: Percentage of first-time home buyers who had student loan debt.

$29,000: Average student debt for first-time buyers.

7: Average number of years college graduates delay in buying a home.

Source: National Association of Realtors.