How Holiday Debt Affects the Real Estate Market

Published on December 27th, 2016

After the holidays, it can be hard to find the money to pay your monthly bills and mortgage if you didn’t budget effectively. Did you know your holiday debt can affect the real estate market? There are many factors that contribute to the effects on the real estate market including student loan debt and consumer debt.

Debt leaves lasting effects not only in the real estate market, but also on the stress and well-being of a person and their family. The growing burden of debt among Millennials leads to a decline in first-time homebuyers. First-time homebuyers are representing less and less of mortgage transactions as each year goes by. According to a National Association of Realtors (NAR) Profile of Home Buyers and Sellers in 2014, only 33% of transactions involved first-time homebuyers, the lowest percentage since 1987.

Americans are actually putting off purchasing a home to later in their life because of student loan debt, on top of debt that may have incurred from the holidays. John Burns Real Estate Consulting estimates approximately 308,000 purchases were “lost” because of student loan debt with payments up to $500 monthly.

Although student loan debt is a greater contributing factor to recent college graduates pushing off home buying and starting a family, consumer debt (specifically around the holidays) also contributes to the home buying process. The amount of debt a person or a couple has together is a risk factor the lender considers when reviewing their mortgage application. If the borrower(s) has too much outstanding debt, they may be seen as unreliable in making payments and could be denied during the pre-qualification process.

Overall, debt has a huge effect on the real estate market. It has lowered the rate of first-time homebuyers, and that affects the number of people looking to get another mortgage or refinance. In conclusion, the best way to keep yourself on track and reach your goal of homeownership is to budget effectively, especially around the holidays.

If you are currently house hunting or looking to refinance during the holidays season, get a free rate quote to estimate your monthly payments and connect with one of our dedicated mortgage advisors. Don’t do mortgages like your parents did. Do it digitally, with vLoan. Follow @vLoanMortgage on Facebook, Twitter or Instagram to keep up to date with our monthly campaign #HomeForTheHolidays.

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