Student debt isn’t holding back most young professionals from buying a home, according to a report Thursday by Zillow, contradicting warnings from some economists that rising student-debt levels hurt the housing market.
The report, which draws on 2013 data tracking thousands of households since the late 1960s, found that having more student debt had only a slight negative impact on homeownership for people who get their degrees.
For example, a couple with no student loans and at least one bachelor’s degree between them have a 70% chance of owning a home in their early 30s. A couple with $30,000 in student debt and at least one bachelor’s degree have a 68% chance.
What’s more, the probability of owning a home changes little based on how large the couple’s loans are, especially if it means they got more education. Couples that owe $50,000 in student loans and have at least one master’s degree have a 75% chance of homeownership. Couples with $10,000 in loans and nothing beyond bachelor’s degrees have a 69% chance of owning a home.
The news is direr for those who rack up student debt but don’t obtain a four-year undergraduate degree. In households with $30,000 in student debt but no degree, the probability of buying a home by their early 30s drops to 40%.
The takeaway, according to Zillow: Households with more education tend to have better career prospects, helping them maintain good credit histories and the ability to convince lenders they are a safe credit risk, even if they still face sizable student loan payments.
“When you get that degree it pays off,” said Skylar Olsen, a senior economist at Zillow.
Student loans have been blamed for holding people back from buying their first homes. That, the thinking goes, produces a drag on the housing market because it means there are fewer new potential buyers to help drive demand.
“I think what people have been doing in the past is looking at this scary spike in student loan debt and looking at declining homeownership among young adults and [concluding] there must be cause and effect,” said Jason Houle, an assistant professor of sociology at Dartmouth College, whose research has similarly shown little correlation between student debt and lack of homeownership.
Mr. Houle found that nearly 21% of student debtors were homeowners, compared with 13% of nondebtors, according to research he published in June with Lawrence Berger, a professor at the School of Social Work at the University of Wisconsin-Madison.
Some economists said headlines about record high student debt might obscure other reasons why young people are struggling to buy a home. For one, rents have risen sharply in recent years, making it more difficult for people to save for a down payments. “If you’re going to talk about what takes up a huge chunk of your income, then rent is a big winner there,” Ms. Olsen said.
Mr. Houle also pointed to people getting married and having children later than in the past as another possible reason for delayed home purchases.
The Zillow study looked only at whether households with student debt have purchased a home by the time they are in their 30s. That means it might not capture the fact that some who in the past might have bought in their 20s are waiting longer to buy as a consequence of heavy debt.
“Some college grads with student loans may well have to delay their transition to homeownership until their earnings rise sufficiently or they have paid down their student debt sufficiently,” wrote Frank Nothaft, chief economist at CoreLogic Inc., in an email. “They ultimately become homeowners, but at a later point in life.”