One of the biggest threats to the Vero Beach housing recovery now seems to be the huge increase in student debt over the past 8 to 10 years.
With students financing their education, many get out of college so deep in debt they cannot even begin to fathom buying a home. It's like the major phone company commercials on TV… "It's not complicated…"
Now the New York Federal Reserve is chiming in and showing that this is starting to happen, not only for Vero Beach housing, but nationwide.
Vero Beach Housing Market Faces Challenges With Student Debt
Total student debt has nearly tripled over the past eight years. The number of borrowers and the average balance per person have grown, along with the number of borrowers past due on student loan payments. Educational debt is now the largest consumer liability after mortgages.
Total student debt stands at $966 billion as of the fourth quarter of 2012, the N.Y. Fed said in press materials, with a 70% increase in both the number of borrowers and the average balance per person. The overall number of borrowers past due on student loan payments has grown from under 10% in 2004 to 17% in 2012. With a fresh new crop of graduating seniors, this number is likely to grow.
Fewer people with student loans are buying homes, according to data in the report. Of borrowers ages 25 to 30 who are taking out new mortgages, the percentage of those with student debt has fallen by half, from nearly 9% in 2005 to just above 4% in 2012.
The higher burden of student loans and higher delinquencies may affect borrowers' access to other types of credit and the performance of other debt. One research report reveals that households with student loan debt are significantly more likely to rent rather than own their home.
The survey found that 85% of the renters making between $50,000 and $75,000 are paying student loans, and we see tighter credit standards for mortgage debt. This is going to equate into the Vero Beach housing market facing a tough road converting these folks into first time home buyers.