Growing student loan debt is weighing on the already tepid housing market according to fresh data from the NY Federal Reserve. Jeanne Yurman reports.
The housing market has not been stellar. Housing starts fell two percent in a report on Wednesday a day after a decline in builder sentiment. One reason for housing's lackluster performance: rising student loan debt is shutting out potential buyers. A new report from the New York Federal Reserve shows student loan debt grew in the fourth quarter of 2014 to a record $1.16 trillion. That's seven percent higher than the year before. And delinquencies are rising too with the current default rate now standing at more than 11 percent - the highest of any type of household debt. Historically first-time home buyers are people in their 20's and 30's. But this same age group is carrying a majority of that trillion dollar student loan debt. The NY Fed concluding: "The growth in student debt, with its monthly cost and high delinquency and default rate, seems to be reducing both household formation and homeownership." Wells Fargo Securities' Senior Economist, Anika Khan agrees. ANIKA KHAN, SENIOR ECONOMIST, WELLS FARGO SECURITIES SAYING (ENGLISH): "There's somewhat of an easing of lending standards overall but for those particular borrowers that have weak credit, it's still is a tough market for them, young adults included. And so for those, particularly young adults, who were hit hard during the downturn and the financial crisis of course especially those that came of age those in that 25 to 34 age range it's just going to take them longer and we've seen many of them delay major life decisions." It's a condition that will continue to affect the housing market for a while according to US Economist, Patrick Newport. PATRICK NEWPORT, U.S. ECONOMIST, IHS GLOBAL INSIGHT SAYING (ENGLISH): "Other than having an improving economy, which of course brings delinquency rates down across the board, there's no reason to expect this to improve that much going forward. It's just a fact of the matter that many students have just taken on more debt than they should have and they made unwise decisions and now they're delinquent" Economists say to shrink student loan debt we need to see labor market growth and higher wages. While wages haven't budged all too much in recent years, the labor market does continue to mark steady gains.