Pulsenomics poll: many economists believe the resumption of student loan payments could significantly hit homeownership rate.
The U.S. housing market has been over the past year walloped by high mortgage rates and a worsening inventory shortage. It now faces another obstacle: student loan repayments. Real estate experts are bracing for a significant blow to the market when the pandemic-era freeze on federal student loan payments comes as October progresses. A recent poll conducted by Pulsenomics found that most economists said homeownership rates will be affected for at least a year by the resumption of student loan payments — and many predicted the impact could be longer than that. For more than three years, federal student loan borrowers have not had to make monthly payments. However, the pandemic-era pause is officially coming to an end, setting up a potential financial shock for millions of Americans. Payments officially came due on Oct. 1, although interest started accruing at the beginning of September. More than 75% of the survey respondents said that the payments will have a negative effect on homeownership that lasts for a year or more. About 40% predicted an even longer impact of at least three years. On top of that, many of the economists believe the resumption of payments could significantly hit the U.S. homeownership rate, and nearly one-quarter expect it would cause an uptick in the delinquency rate. About 44 million borrowers in the U.S. were affected by the payment pause, which initially began in March 2020 at the onset of the COVID-19 pandemic. The Biden administration extended the pause for the eighth time last November and will not do so again as part of the bipartisan debt ceiling deal approved by Congress. The payments can be substantial. The average monthly bill hovers between $200 and $299 per person, although it is even higher for some borrowers, according to the most recent Federal Reserve data. Collectively, borrowers are to resume paying about $10 billion a month, according to an analysis from JPMorgan. The potential hit comes at an already precarious time for the housing market, thanks to the astronomic rise in mortgage rates over the past year. In fact, housing affordability is worse today than during the peak of the 2008 housing bubble.
Source: Fox News
Editor’s Note – Some effects will be lessened because some payments will be affected by Income Driven Repayment Programs (IDRP)—though these borrowers are not likely to be prospective homeowners due to their lower income.