As foreclosure rates continue rising in August, some wonder if President Biden’s student loan forgiveness plan could save the real estate industry by bringing in an influx of new buyers who were previously unable to afford their own homes. This could be a huge boon to real estate agents, sellers, and even lenders who are currently struggling to retain potential buyers and attract new ones.
Can President Biden’s Student Loan Forgiveness Plan Save the Real Estate Market?
There is an abundance of evidence that many students who have had some or even all their loans forgiven will want to use their newfound wealth to buy a home. A recent survey by Rocket Homes Research found that 16.7% of those impacted by the President’s student loan forgiveness plan want to buy a house this year, as opposed to only 5.4% of borrowers who intended to do so before student loan forgiveness was announced.
Home Purchasing Power
When asked about buying a house in the next one to three years, a whopping 68.5% of individuals who have received student loan forgiveness said they would do so, as opposed to fewer than 50% before student loan forgiveness was announced. However, whether these individuals will actually purchase a home remains to be seen. Inflation is likely to continue to push interest rates up, which could impact many potential buyers who may be unable to save up enough money for a down payment. On the other hand, the fact that rents are also rising is pushing many current renters to make a home purchase in the hopes of lowering expenses.
Effect on the Market
At the same time, it should be noted that not all home markets will benefit even if there is an influx of new buyers. The median sum of money that student loan forgiveness beneficiaries want to spend on a home ranges from $200,000 to $399,000, so luxury homes are unlikely to see a growth in potential buyers. While sliding housing prices may lead many to consider staying in high-cost areas, recent trends indicate that many people are leaving states with a high cost of living and moving to ones that have either no personal income taxes or a low personal income tax rate. Popular destinations include Florida, South Carolina, South Dakota, Oregon, and Idaho, while states that are losing people include California, New Jersey, New York, Illinois, Massachusetts, and Michigan.
The Lasting Impact
About 43 million people have been impacted by President Biden’s student loan forgiveness plan and tens of millions of these individuals now want to purchase their own homes. However, it is too early to know for certain if these individuals will actually do so in the next one to three years. Rising interest rates and inflation may put off many would-be buyers, and those who still owe some money on their loans may have to lower their debt-to-income ratio in order to make a purchase.
However, the fact that many of these buyers are highly motivated to purchase their own home will almost certainly lead to at least a small jump in the number of potential buyers in desirable areas that meet these buyers’ criteria, offering some relief to the currently struggling real estate market in at least some areas.
Contact Peak Foreclosure today to learn more.
Sources
- Biden’s student-loan forgiveness is a ‘game changer,’ but will it enable millions of renters to finally purchase a home? (msn.com)
- Millennials Anticipate Buying A New Home With Student Loan Forgiveness | Rocket Mortgage
- USA News: https://ussanews.com/2022/08/17/people-are-migrating-to-affordable-low-tax-states-like-north-carolina/
- How Will Student Loan Forgiveness Affect My Credit? – Forbes Advisor