The Chicago Association of REALTORS®, the “Voice for Real Estate” in Chicago since 1883, represents over 17,000 members from all real estate specialties including commercial sales, development, property management, appraisal, auctions and residential sales.
Learn how we help our 17,000+ members. Membership options are available for licensed real estate professionals and those affiliated with the real estate industry!
REALTORS® Real Estate School offers all kinds of real estate licensing and training. Browse self-paced, online training or live classes in our modern, downtown classrooms!
How can we help your business succeed? Your membership includes multiple resource guides on industry topics, tools to increase your knowledge and market statistics to help your serve your communities.
Author: Mabel Guzman, Broker, @properties, 2016-2017 NAR Vice President
In the midst of the housing crisis in 2012, where we saw record foreclosures and short sales, a simple question was broached: how will families pay for college, when there is no equity or a home to leverage?
Perhaps lower enrollment numbers, increased attendance at community or online colleges or “borrowing” from alternate sources were the answers.
Today, students have borrowed 1.23 trillion dollars in loans. Student loans is the number one debt class in the United States, exceeding all credit card debt combined as of December 30, 2015.
So, how does all this debt relate to housing?
When we talk about what impacts the housing market, we generally focus on things like the regulatory environment, credit or mortgages. We use terminology like “credit box,” TRID, DTI, PMI, etc. We rarely examine external pressures or impacts outside of a real estate-related field — until now.
With all the discussion on debt and, more specifically, on student loan debt, the National Association of REALTORS® decided to step outside the box and take a look at how student loan debt is shaping housing and, perhaps, the future of our country.
NAR hired American Student Assistance (ASA) to conduct a comprehensive study, resulting in the 2016 Student Loan Debt and Housing Report. The study polled as many as one thousand student loan debt borrowers and found the average student loan debt to be approximately 25,000 dollars.
What’s alarming is not only the amount of debt, but also the impact it’s having on housing formation. 71% said student loan debt was their cause for the delay in purchasing a home, and that delay is approximately 5 years. You may think, all they have to do is wait. But, they may then also face other factors including increased property taxes, housing prices and low inventory that could keep them out of housing for even longer.
Now, let’s look at how that impacts our market — the ripple effect of student loan debt.
Currently, we are experiencing the lowest participation rate of first time buyers. Nationally, it’s at 32 percent, the lowest since 1987; considering the average is usually 40 percent, that’s a significant loss of transactions.
Let’s go further, now, and look at the economic impact.
Here’s the math:
Illinois REALTORS® reports that 24,000 dollars enters the economy from a single home purchase.
Year to date transactions in the City of Chicago are at about 14,000 (as of June 2016). With an eight percent participation rate loss, that’s an additional 1,120 transactions that aren’t putting money back into the economy. Multiply those 15,210 transactions by 24,000 dollars per transaction… and that’s 26,880,000 dollars that our local economy could definitely use.
So what has to change?
We must do better to educate student borrowers prior to taking on this debt.
For those who have student loan debt and currently own, they can utilize mortgage products as a way to reduce or get rid of their debt through a Home Equity Line of Credit (HELOC) or a Cash Out Refinance. These options may work now in an environment where interest rates are at an all-time low, and some student loan debt rates are at nine percent. Of course, this is FICO score and equity-driven.
For those on the purchase side, consolidate student loan debt, and work with a lender who will guide you on how to improve your credit and understands HUD rules regarding student loan debt.
It is imperative, as well, to support legislation that would streamline and simplify student loan debt repayment.
Currently there are seven bills in Congress that could help not only these students, but also our economy. An example in the House is H.R. 3179, the “Empowering Students Through Enhanced Financial Counseling Act,” which focuses on educating and preparing students to handle the debt prior to taking on such an obligation. And, in the Senate, S. 1948, the “Access to Fair Financial Options for Repaying Debt Act,” helps to provide more repayment options.
What can I do as a REALTOR®? If you focus on first-time buyers, look to add another market segment. Start a meetup with a lender and provide education and strategies to help your clients get out of debt sooner. Utilize the Consumer Finance Protection Bureau (CFPB) website, which has rich information on student loan debt, prior to taking out any loans, and learn how to manage the debt once you have it. Finally, and most importantly, contact your Congressman/woman and tell them to support legislation that would move our economy forward regarding student loan debt.
Author: Mabel Guzman, Broker, @properties, 2016-2017 NAR Vice President
In the midst of the housing crisis in 2012, where we saw record foreclosures and short sales, a simple question was broached: how will families pay for college, when there is no equity or a home to leverage?
Perhaps lower enrollment numbers, increased attendance at community or online colleges or “borrowing” from alternate sources were the answers.
Today, students have borrowed 1.23 trillion dollars in loans. Student loans is the number one debt class in the United States, exceeding all credit card debt combined as of December 30, 2015.
So, how does all this debt relate to housing?
When we talk about what impacts the housing market, we generally focus on things like the regulatory environment, credit or mortgages. We use terminology like “credit box,” TRID, DTI, PMI, etc. We rarely examine external pressures or impacts outside of a real estate-related field — until now.
With all the discussion on debt and, more specifically, on student loan debt, the National Association of REALTORS® decided to step outside the box and take a look at how student loan debt is shaping housing and, perhaps, the future of our country.
NAR hired American Student Assistance (ASA) to conduct a comprehensive study, resulting in the 2016 Student Loan Debt and Housing Report. The study polled as many as one thousand student loan debt borrowers and found the average student loan debt to be approximately 25,000 dollars.
What’s alarming is not only the amount of debt, but also the impact it’s having on housing formation. 71% said student loan debt was their cause for the delay in purchasing a home, and that delay is approximately 5 years. You may think, all they have to do is wait. But, they may then also face other factors including increased property taxes, housing prices and low inventory that could keep them out of housing for even longer.
Now, let’s look at how that impacts our market — the ripple effect of student loan debt.
Currently, we are experiencing the lowest participation rate of first time buyers. Nationally, it’s at 32 percent, the lowest since 1987; considering the average is usually 40 percent, that’s a significant loss of transactions.
Let’s go further, now, and look at the economic impact.
Here’s the math:
Illinois REALTORS® reports that 24,000 dollars enters the economy from a single home purchase.
Year to date transactions in the City of Chicago are at about 14,000 (as of June 2016). With an eight percent participation rate loss, that’s an additional 1,120 transactions that aren’t putting money back into the economy. Multiply those 15,210 transactions by 24,000 dollars per transaction… and that’s 26,880,000 dollars that our local economy could definitely use.
So what has to change?
We must do better to educate student borrowers prior to taking on this debt.
For those who have student loan debt and currently own, they can utilize mortgage products as a way to reduce or get rid of their debt through a Home Equity Line of Credit (HELOC) or a Cash Out Refinance. These options may work now in an environment where interest rates are at an all-time low, and some student loan debt rates are at nine percent. Of course, this is FICO score and equity-driven.
For those on the purchase side, consolidate student loan debt, and work with a lender who will guide you on how to improve your credit and understands HUD rules regarding student loan debt.
It is imperative, as well, to support legislation that would streamline and simplify student loan debt repayment.
Currently there are seven bills in Congress that could help not only these students, but also our economy. An example in the House is H.R. 3179, the “Empowering Students Through Enhanced Financial Counseling Act,” which focuses on educating and preparing students to handle the debt prior to taking on such an obligation. And, in the Senate, S. 1948, the “Access to Fair Financial Options for Repaying Debt Act,” helps to provide more repayment options.
What can I do as a REALTOR®? If you focus on first-time buyers, look to add another market segment. Start a meetup with a lender and provide education and strategies to help your clients get out of debt sooner. Utilize the Consumer Finance Protection Bureau (CFPB) website, which has rich information on student loan debt, prior to taking out any loans, and learn how to manage the debt once you have it. Finally, and most importantly, contact your Congressman/woman and tell them to support legislation that would move our economy forward regarding student loan debt.
