If you’ve ever gone through the process of qualifying for a mortgage, you know that high amounts of student debt can turn off a lot of lenders from qualifying someone for a mortgage. And with the amounts of student debt on the rise, it’s no surprise that a link exists between student debt and renting.
Debt Piles Up
According to the Colorado Real Estate Market Journal, the Fed’s have compiled research showing that between 2005 to 2014, the average student loan debt virtually doubled. National homeownership rates among those aged 24-32 dropped close to 9%, with about 20% of that increase listing the rise in student debt as the reason. The Feds concluded then that a $1000 increase in student loan debt “causes a 1 to 2 percentage point drop in homeownership rate for student loan borrowers during their late 20s and early 30s.”
What About Colorado?
According to the same findings, that trend extends to Colorado. Between 2008 and 2018, student loan debt in the state increased over 130% to $26.5 billion. During this same 10-year period, homeownership rates dropped from 69% down to 63.7%.
Two Sides to the Story
While student loan debt definitely contributes to the decline in homeownership, it’s not the only reason. Millennials are quickly rising as the dominate generation within the working world. With that comes a shift towards renting as the popular option. Renting offers flexibility that owning just doesn’t, something many Millennials consider highly important.
But it’s not just Millennials. A large number of Baby Boomers have also chosen to rent instead of buy. Many who choose not to buy prefer renting for 3 simple reasons: 1) they don’t have to maintain or repair it at their own cost; 2) they can live closer to urban hot spots and popular areas; and 3) many of the new builds offer luxury amenities that a lot of homes for sale don’t.
The Big Picture
Housing will always be a need, and if you own a rental property in Colorado Springs, current trends suggest that it makes sense to hang on to it. With favor shifting towards renting over owning, rentals will continue to be in demand.