Student loan debt weighs down housing market

Young families are just as motivated to own homes as were their parents and grandparents - perhaps more so. But one problem is blocking their capabilities to become homeowners.

Buying a home requires cash down payment. Many first-time buyers are having great difficulty in saving for that payment. One reason is that many are saddled with student loans they are desperately trying to pay off.

The National Association of Realtors recently studied this problem. They issued a report on their findings:

"NAR Research recently took a look at the impact that student loan debt is having on young buyers, and what region of the U.S. is seeing the highest amount of student loan debt. They found that in 2015, 25 percent of first-time buyers under the age of 34 said saving for a down payment on a home was the hardest step in the process."

The report also noted that 58 percent of this group mentioned that student loan debt kept them from buying a home.

"Certain regions are faring better than others. The South Atlantic states, Delaware, Maryland; Washington, D.C.; West Virginia, Virginia, North Carolina, South Carolina, Georgia and Florida had the lowest median student debt at $15,000.

"On the other hand, the East South Central region, which includes Kentucky, Tennessee, Mississippi and Alabama, had a median student loan debt of $70,000."

According to NAR Research, this contrast warrants further research into how the number of jobs and salaries on the market affect student loan debt, thus delaying younger buyers from purchasing a home for three to five years.

Q. Are mortgage rates still rising?

A. Not at this point. Freddie Mac released the results of its Primary Mortgage Market Survey, showing mortgage rates moving lower for the third consecutive week, amid another week of market turbulence.

"The 30-year fixed-rate mortgage averaged 3.81 percent with an average 0.6 point for the week ending Jan. 21, down from the previous week when it averaged 3.92 percent. A year ago at this time, the 30-year FRM averaged 3.63 percent.

"The 15-year FRM (that) week averaged 3.10 percent with an average 0.5 point, down from 3.19 percent (the previous) week. A year ago at this time, the 15-year FRM averaged 2.93 percent."

Q. Are mortgage applications rising?

A. At this writing, applications are increasing, as reported in a news release from the Mortgage Bankers Association.

"MBA's purchase mortgage application index reached its second highest level since May 2010 on a seasonally adjusted basis. Bolstered by strong fourth quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market's strong finish to 2015 may be continuing.

"The refinance share of mortgage activity increased to 55.8 percent of total applications from 55.4 percent the previous week. The adjustable-rate mortgage share of activity increased to 5.1 percent of total applications.

"The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.12 percent from 4.20 percent, with points decreasing to 0.38 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week."

Q. Are applications for mortgages to finance newly constructed home purchases increasing?

A. These applications are declining a bit. The Mortgage Bankers Association Builder Application Survey data for December shows mortgage applications for new home purchases decreased by 5 percent relative to the previous month.

"It showed mixed-results (in December) with some lenders seeing steady or slightly increasing application levels while others saw declines. On net, we estimate that new single-family home sales were down by about 8 percent in December on a seasonally adjusted basis relative to November, but remain 17 percent above a year ago," said Lynn Fisher, MBA's Vice President of Research and Economics.

Q. What is a "stigmatized" home?

A. It's a home that carries one or more stigmas. A home that was the site of an infamous murder, or where someone died from a rare and mysterious illness, are examples of stigmas.

Also, a home that has a local reputation as being haunted is another common stigma. Any noteworthy stigma should be revealed to prospective buyers by the owner or broker.

• Email Jim Woodard at

© 2016, Creators Syndicate

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