Is a college degree worth it?

Since I successfully sold and bought a new home last fall, only after completing a process that was worse than root canal without Novocaine, I have wondered what is happening to the young, first-time home buyer who bid up the price of my former house a decade ago only to leave screech marks in front of it as they sped away to their next appointment 10 years later.  My experience isn’t all that unique.

Lawrence Yun, chief economist of the National Association of Realtors, explained earlier this year that “the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own.”  According to NARS 2014 generational trends survey, of the 20% of millennials who took longer to save for a down-payment, 56% cited student loan debt as the biggest obstacle.

How big an impact are student loans having on the housing market? Historically, the college-educated first time home buyer had more debt but also greater earning potential so was more willing to plunk down money to own a home.. However, as recently summarized by the Federal Reserve’s Bank of New York’s Liberty Street blog post, the failure of young educated consumers to enter the housing market remains a puzzle.  “Whatever the cause of student borrowers’ reticence. the housing market rebound of 2013 appears to have preceded without the help of this skilled set of young buyers.”

Is it possible we are seeing evidence of a negative feedback loop?  A record number of people have gone to college over the last six years in hopes of getting a better, more secure job.  To do so, they have taken on more debt  Is it possible that we have reached a tipping point where the amount of debt taken out for a college degree is beginning to outweigh its benefit?  People are putting off first time home purchases not because they want to but because they have to.

continue reading »