96 Percent of U.S. Housing Markets Still Affordable for Recent Grads Saddled With Student Loan Debt

IRVINE, CA--(Marketwired - Sep 4, 2014) - RealtyTrac^® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released a report analyzing the affordability of homeownership for recent college graduates, which found that 96 percent of U.S. housing markets are still affordable for recent graduates making the median household income -- even those with student loans.

Using median home price data collected from public records along with average student loan debt by state from The Institute for College Access & Success (www.ticas.org), the report examined the minimum amount of income needed to purchase a median priced home with and without student loans in 494 counties, each with a population of at least 100,000 and where sufficient data was available. In 475 counties (96 percent), recent graduates making the median income and having the average student loan debt for the state could afford to buy a median-priced home. Affordable for this analysis was considered up to a maximum 43 percent of income spent on house payment (including taxes and insurance) assuming a 20 percent down payment and a 30-year loan with a 4.13 percent fixed interest rate.

"Contrary to much rampant speculation that student loan debt is holding back homeownership among recent graduates, we found that the vast majority of markets are affordable for recent graduates making the median household income -- even many of those recent graduates with student loans," said Daren Blomquist, vice president at RealtyTrac. "However, student loans still represent a significant handicap for recent graduates in terms of the minimum income needed to buy a median priced home. Nationwide, recent graduates with student loans need to earn 34 percent more ($8,969) than recent graduates without student loans to be able to afford a median-priced home."

Student loans biggest hindrance to affordability in Michigan, Ohio, Pennsylvania
States where recent graduates with student loans needed to make up the biggest percentage in income to equal the buying power of those without student loans were Michigan (55 percent), Ohio (53 percent), Pennsylvania (49 percent), Iowa (48 percent), and Alabama (47 percent).

Affordability for median-income earners was still good in all of these states, with the median household income comfortably above the minimum income needed to buy a median priced home -- even with student loan debt. But the average amount of student loan debt in these states was large relative to median home prices, resulting in a bigger percentage impact on home affordability.