The real estate industry is in a war, and they do not even realize it.
The major combatants are the real estate industry, the educational establishment, and the automotive industry.
The war is being fought over the young people’s debt.
Because unlike the government, the individual can only borrow so many dollars.
Now the bad news for those in the real estate industry, you are losing. Big time!
Why, because banks learned that a homes collateral is no where near as secure as a student loan. A mortgage used to be the gold plated loan, with values fairly secure, and large down payments protecting the lender.
But then came the federal government with their guaranteed loan program for students. These used to be risky loans for banks to offer as it was dependent on the future prospects of the borrower. Now they are the gold plated loan. Why, because they are not dischargable in bankruptcy. They will follow you until you die.
And this is a bankers dream. They will lend crazy money for you to get your philosophy degree, and even lower your payments when you are working as a barista, but they will never discharge the debt.
And when your career starts to turn the corner, you find your dream spouse, and it is time for the white picket fence, you are in for a shock.
You are carrying so much student debt that the entry level homes are beyond your ability to buy. Banks will look at your debt ratio and smile sweetly as they tell you that they can not help you.
And smile they will, because they do not really care if you buy a home, they just want to have you paying them interest. And you are already doing so…
Later on, we will do a post on how to get out of the trap, or even better, never get into it in the first place.
Until then, pay down your student loans as fast as you can if you want to be a homeowner in the future. Keep eating Ramen and drinking box wine or cheap beer. But get out of debt ASAP!