But Student Loans are a Drag…


Demand for homes continues to stall according to the most recent report on mortgage applications from the Mortgage Bankers Association (MBA). Equity researcher Stephen Kim has released an in-depth report titled: The Return of the First-Time Buyer. In this report he cites three solid reasons why potential homebuyers could enter the market:

1)     Job growth is reaching an important threshold for improved household formation. The cumulative number of jobs created over the past several years has now reached the point where each new job will drive greater household growth.

2)     Credit Availability starting to loosen: Lenders’ willingness to extend credit to borrowers in the entry-level “sweet spot” of 600-700 FICOs is gaining momentum.

3)     Affordability still favorable: Buying a home is still 20% cheaper than renting and affordability is unlikely ever to be better, given interest rate and home price trends.

There is a BIG negative out there as well, he writes. And that is that Student Debt is the thorniest problem for the mortgage (hence housing) industry. Kim predicts that this period of slower growth is consistent with the view that the housing market will recover back to normalized levels by 2016.

I would add one other market incentive to include the return of the Boomer Buyer — getting back into the real estate game following their short sale or foreclosure.


-Mike Bodeen