Millennial Myth About Home Ownership And Student Debt Is Blown Wide Open

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Millennials have an uneasy relationship with home ownership.

Sometimes it's too expensive. Other times they'd rather just spend their money on something else.

But what are the social factors that affect home ownership? Research out of the Brookings Institution provides some ideas.

toronto real estate
A home for sale in Toronto's Rosedale neighbourhood. (Photo: Chris So/Toronto Star via Getty Images)

The Washington, D.C.-based think tank issued a report Tuesday titled "The dividing line between haves and have-nots in home ownership: education, not student debt."

Senior fellow Susan Dynarski wrote it as a response to the erroneous idea that student debt is stopping millennials from buying a home in the U.S., thus delaying a housing recovery after the financial crisis.

Such a narrative has been advanced by prominent economists such as Joseph Stiglitz and Lawrence Summers, she said, and it's based in flawed data that was released by the Federal Reserve Bank of New York in 2013.

This data has been used to argue for easing student debt burdens because they're dragging the economy down.

This graph shows home ownership rates dropping faster among those with student debt than those without, before dropping below them in 2012.

student debt home ownership

But there's one major problem: the line representing "no student loan debt" doesn't separate out college attendees who had student debt and those who didn't have higher education.

It was based only in credit records, and the researchers couldn't break individuals apart based on whether they went to post-secondary school.

Dynarski's report relied on data contained in a 2014 note by researchers with the Board of Governors of the Federal Reserve System.

They looked at the credit records of people aged 29 to 31 years old between the years 2004 and 2010 and combined them with college attendance records.

First, they plotted their data the way the New York Federal Reserve did, by grouping people with "no student debt," even if they didn't go to college.

student debt

Then they broke out the non-indebted group between the college-educated and the not:

student debt

The graph above shows that, while home ownership dropped sharply among people with a college education, it also fell among the other groups.

Those without higher education, for example, saw the home ownership rate drop below 20 per cent in 2010.

A third graph illustrates home ownership rates in three groups: college students with debt; college students with no debt; and people who never went to college.

And its findings contrast sharply with those of the federal reserve.

college education home ownership

It shows that people with no college education had higher home ownership rates at age 23.

But those with student loan debt caught up to them at age 26. And home ownership among college-educated people who were both indebted and debt-free was well above those with no college experience by the time they were 35.

In other words, the research shows that home ownership in the U.S. is more closely correlated with one's education than it is with student debt.

toronto real estate
A house with a "sold" sign in Toronto in 2015. (Photo: Mark Blinch/Reuters)

Elsewhere, new research is providing insight into why millennials are choosing to delay the decision to buy their own homes.

In late April, the Bank of Montreal (BMO) released a survey showing that millennials aren't rushing into home ownership, even if they're tired of renting.

Seventy-six per cent of respondents said they were concerned about finding something wrong with a property after buying it, while 66 per cent were worried about its value plummeting.

So even there, another myth was crushed: for millennials, buying a home isn't all about its retail price alone.

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