10 REALTOR® JULY/AUGUST 2016 REALTORMAG.REALTOR.ORG
top of mind
Student Loans Fuel Wealth Gap
The net worth of Americans is $85
trillion, the Federal Reserve says. That’s
almost double what it was in 2000. But
not everyone is celebrating.
During the early 1980s, the median
net worth of a household headed by
someone under 35 was $15,260, while
for a household headed by someone over
65 it was $120,500. You would expect
this roughly 10-to- 1 wealth di;erence,
because people’s earning power and
savings grow over time.
What we’re seeing today is quite
di;erent. As of 2013, the gap between old
and young is twice that: 20 to 1. The typ-
ical older household now has $210,500
in wealth compared to $10,500 for a
younger household. I expect that gap to
widen further when more data come out.
No doubt the cause is multifaceted.
But one important factor is home ownership opportunity. The home ownership
rate among the older generation has
been fairly steady over the recent housing cycle of bubble-bust-recovery, with
nearly 80 percent of those over 65 owning a property. But the home ownership
rate of households under 35 has fallen to
34 percent from the recent cyclical peak
of 43 percent. That’s why the first-time
home buyer percentage is at its lowest
point in 30 years.
Young people have it bad. Student
loan debt is one reason. The burden
has tripled over the past decade, with
recent graduates carrying an average of
$29,000. A survey we completed in mid-
June found that 71 percent of graduates
who are responsibly paying back their
loans are delaying their home purchase
by five years because of their debt.
Money doesn’t grow on trees, so free
college education is probably impossi-
ble. But let’s ask why interest rates on
student loans are so high, ranging from
7 to 12 percent when interest rates on
other loans are extremely low? We need a
way to refinance student loans into lower
rates. That’s a solution we’re backing in
Congress, and it’s one of the ways we can
support home ownership among young
buyers and start to close that wealth gap.
Lawrence Yun is
NAR chief economist.
The national median home price is steadily
outpacing growth in household income,
NAR data show. To close the gap, home
price increases will need to slow or household
income will need to rise more quickly—
or some combination of the two will need
MARKET PULSE The U. S. economy slowed in the first quarter and job gains—while
growing—lost some momentum. But with interest rates still low, residential sales steadily increased
well into the spring. The surging dollar following the U. K. referendum to leave the European Union is
expected to keep U. S. rates low. Ongoing volatility could help U. S. real estate in the short term.
EXISTING-HOME SALES Seasonally adjusted annual rate, which is the actual rate of sales for the month,
multiplied by 12 and adjusted for seasonal sales di;erences.
INVENTORY Number of existing homes on the market at the end of the month.
PRICE National median.
2. 15 Million
SUPPLY & DEMAND
All trend lines are from May 2015 to May 2016.
Source: NAR Research
Index of National Median
Home Prices and Median Family
Income as of April 2016
National Median Home Price
Household Income Growth
4/2016 4/2015 4/2014 4/2013 4/2012