Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

Is Debt or Income Preventing Young Americans From Buying Homes?

It’s understandable that young Americans would not want to take out even more debt to purchase a home after the housing bust led to a wave of New York bankruptcy filings and foreclosures. Indeed, according to a 2014 Federal Reserve Bank of New York study, the number one reason a group of renters gave for preferring renting over owning was high debt and low savings. (Unfortunately, the question didn’t separate the two.) Reasons number two and three were low income and low credit, respectively. Fear of falling housing prices came dead last. These phenomena apply all the more to young Americans.

All this raises the question: Is debt or income responsible for young Americans’ reluctance to enter the housing market?

According to research by the popular personal finance Web site NerdWallet, the millennial generation (born 1981-1997) wants to buy houses, but its credit isn’t good enough to allow it. Low savings, low incomes, and preexisting debts followed after that. In a sense, if low savings and high debts were combined, the report probably would have corresponded more to the one from the New York Fed.

Meanwhile, debt wasn’t deterring young renters from owning, according to the report. Only 3 percent fewer millennial households with student loan debts obtain mortgages than those without. Graduates of four-year colleges tend to have better luck ownings homes. Instead, it’s the non-completers and associate’s-degree holders who struggle to enter the housing market. The report concedes that half of households headed by people in their 20s or 30s do not have four-year degrees.

NerdWallet goes on to discuss financing options that require down payments that are lower than the traditional 20 percent of the purchase price. This point is fairly weak: Generous credit options won’t reduce house prices or monthly payments.

Unfortunately, millenials’ incomes are probably the bigger issue here. Although NerdWallet finds a healthy debt-to-income ratio for the median American in the 25-34 age bracket, such measures don’t include workers with no earnings, which nowadays is 5 percent higher than before 2008 (see Table PINC-03). In part that’s due to greater numbers of younger people staying in college, but a lot of it is people leaving the labor force. With lower incomes, it’s unsurprising that their homeownership rates for those under 35 have fallen to 35 percent, which is probably a record low going back to the 1980s.

The NerdWallet report is here.

To answer the question, then, it’s probably low income that’s ultimately driving the low homeownership rate for young Americans. Debt and savings play a role—certainly in perceptions—but without substantial incomes, debtors can’t afford to repay debts or save for homes. As a result, it’s unlikely that millennials will own homes in the future, but whatever generation you belong to, if you are encountering financial difficulties due to your debts, it can help to talk to an experienced New York bankruptcy lawyer.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top