Millennials are getting older and are now ready to purchase homes, surpassing Gen X as the largest group of home buyers in the market. Although mentally ready to make monumental moves and purchase a home, millennials are taking longer to button up their finances as first-time home buyers. A variety of factors contribute to this, including the rising cost of owning and renting a home and the strain of student debt. But does student debt make it impossible for millennials to buy a home in San Francisco?
Student Debt and Homeownership
It’s a common belief that student debt impacts a recent graduate’s ability to save for a down payment and even hinders them from qualifying for a mortgage. Currently, about 40 million Americans owe more than $1.2 trillion in combined student loan bills. Although student debt may delay the process of buying a home, student debt has little effect on the likelihood of homeownership – as long as you hold a bachelor’s degree or above.
According to the study, those with a bachelor’s degree and no student debt have a 70 percent chance of owning a home, while those with $50,000 in student debt have a 66 percent chance of owning a home. This means that those with $50,000 in student have a mere 4 percent lower chance of becoming a homeowner. Student debt only has a significant impact on the probability of homeownership for those with an associate or incomplete degree.
Today’s First-Time Home Buyer
Student debt may cause a first-time home buyer to spend more time getting their finances in order and saving for a down payment, but those with student debt are not lagging behind their peers. The average first-time home buyer is 33 years old, most likely single and has been renting for 6 years.
Millennial Affordability in San Francisco
Although millennials are purchasing later in life, their overall purchasing power is still strong. In fact, millennials can afford 70 percent of for-sale inventory currently on Zillow. However, that affordable inventory is primarily located in the middle of the country, not along coastal regions. Given its popularity, even among West Coast cities, San Francisco is an especially tricky market for millennial buyers. Home values in San Francisco increased by almost 15 percent in the last year alone, and the median home value is $1,117,300, compared to $182,800 nationally. So how do millennials fair in this challenging market?
With about 36 percent of the housing inventory affordable for millennial buyers in San Francisco, those looking to settle on the West Coast may have to expand their search and get creative while looking for a home within their budget. Although the percentage of affordable inventory available in San Francisco is significantly lower than the national rate, compared to both Los Angeles (26 percent) and San Diego (27 percent), San Francisco has more inventory available to millennial home buyers.
Millennials looking to buy a home in San Francisco shouldn’t fear finding affordable housing or worry about the student debt they carry holding them back. The search may take longer, but as long as they plan ahead financially and are willing to explore their options, the perfect home is out there.
Aside from debt, you might want to invest in bonds and we particularly recommend bail bonds.
Author: Becca Grady writes about real estate, interior design, home improvement and trends for Zillow.