STOCK MARKET WATCH -- Tuesday, 23 April 2013

[Fuddnik]

26. Student loan debt putting damper on housing demand

Stephanie O'Donnell-Peters isn’t exactly sure how much she and her husband owe on their student loan debt, but she estimated it’s around $125,000.

“We’re paying about $1,300 a month, plus our rent, plus other bills. If we didn’t have that we’d easily be able to save for a down payment.” As it is, O’Donnell-Peters said it could take another decade before she and her husband are able to own their own home.

A new study indicates that she’s not alone. Ballooning student loan debt is dampening young adults’ appetite for mortgages and car loans, potentially threatening the fragile recovery.

“Household formation ... might not pick up as fast as it would have otherwise because of student loan debt,” said Jed Kolko, chief economist at real estate website Trulia.com.

An economist and a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group found that, in a reversal of a long-term trend, 30-year-olds with student loans are now less likely to have mortgages and car loans than those without those debts.

Higher education, especially at the bachelor’s degree level and up, is linked to higher income. Young adults with student loan debt have typically been more likely to have mortgages and car loans because they could afford homes and new (or newer) cars.

The report said that since 2003, the percentage of 25-year-olds who carry student debt rose from 25 percent to 43 percent, and the average balance nearly doubled, reaching $20,326 in 2012. This burgeoning student loan debt could be crowding out the other investments young adults typically make.

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http://www.nbcnews.com/business/student-loan-debt-putting-damper-housing-demand-6C9525090