Is student debt hurting the Waltham housing market?

According to the just released 2014 National Association of Realtors® Profile of Home Buyers and Sellers report, there is a drop in the number of first time home buyers. This, despite low unemployment and interest rates. While credit requirements are stricter, the real culprit could be student loans. Lawrence Yun, NAR chief economist, says there are lots of reasons why young adults are finding it tougher to buy their first home. “Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” he said. “Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums.” Smaller down payments, (less than 20%), could require FHA financing, which is available for as little as 5% down payments. The problem is, the mortgage insurance required on those loans are now more expensive.

How could this affect Waltham? Considering that a part of the Waltham housing market is made up of condos and modest priced or entry level homes, we could see homes in the lower price ranges suffer a little. In fact, the latest market statistics are indicating a 1.5% drop in the average sales price of condos from this time last year.

It also doesn’t help that investors have been competing for the same properties, and the inventory is low to begin with.

There is a ripple effect that we could see. If first time buyers aren’t buying, the sellers of the unsold properties are not able to buy the next higher price range home.

It’s hard to say if this is a long term trend, or something that will get better as more homes come onto the market, overly tight credit restrictions are eased, and student debt eases.

If you have a question about real estate or the market itself, email me at GRogers@remax.net

Waltham resident Gary Rogers has been considered an expert in the real estate industry for over 27 years. He has been quoted or interviewed by the Wall Street Journal, Money Magazine, Bloomberg Online, the Boston Globe and NECN’s “This Week in Business”. He currently serves as the Regional Vice President of the National Association of Realtors, the nation’s largest trade organization whose goal is the protection of private property rights and the promotion of homeownership. Locally, Gary is the broker owner of REMAX On The Charles, which primarily serves home buyers and sellers in the Waltham area.