Are markets still heating up, leveling off — or is there a bubble imminent? This week’s news is all about market updates and projections, but first, let’s tackle the subject of student loans.
At $1.3 Trillion, Here’s How Student Loans Affect the Economy
It’s new news to hardly anyone that student debt is a burden holding many a Millennial back from major financial steps. As reported by the Boston Globe, America’s student loan debt has surpassed every type of consumer debt except mortgages, at a whopping $1.3 trillion. This averages out to more than $3.8k per American; however, this debt falls most heavily on Millennials, 70 percent of whom have student debt.
With the average student loan well into the five-figure amount, this debt has shaped the way Millennials are making decisions and has resulted in many putting off traditional life milestones such as getting married and buying a house. In fact, reports have found that homeownership in the United States is at a 50-year low, with 71 percent of those with student loans citing them as a major factor affecting their decision not to buy.
Again, none of this is new news, but what’s interesting to note is the domino effect the lack of home-buying is having on economic activity.
Said Jonathan Spader, senior research associate at Harvard’s Joint Center for Housing Studies, “That demand is central to the health of the broader real estate market. To the extent that there’s weak demand at the first-time home-buyer level, it prevents existing homeowners from trading up.”
Related: Is a College Education Financially Worth It — Or Is It a Giant Scam?
Without first-time buyers taking homes off the hands of those looking to move towards a perhaps larger, nicer residence, an obstacle may develop within the natural home-buying cycle.
What many may also fail to realize is that a lack of home buying also affects other businesses, from moving truck rentals to appliance purchases.
Realtor.com Reports 10 Hottest Markets for September
In other news, a study by Realtor.com cites the hottest markets for September, which has seen homes move 4% more quickly than a year ago, even as prices hit record highs.
The methodology used for this study took into account the number of days homes spent on the market and the number of views property listings received on Realtor.com. Their list of top markets saw inventory move 23 to 43 days more quickly than the national average and listings get 1.4 to 3.7 more views.
The top 10 included:
- San Francisco, CA
- Vallejo, CA
- Denver, CO
- Dallas, TX
- San Diego, CA
- Stockton, CA
- Fort Wayne, IN
- Sacramento, CA
- San Jose, CA
- Waco, TX
Chinese Billionaire: China is in “Biggest Bubble in History”
Could Chinese real estate be in big trouble? Said billionaire Wang Jianlin, who made his fortune in real estate, China is in the “biggest bubble in history.”
The problem? According to Jianlin, while prices are rising drastically in huge cities like Shanghai, smaller areas are seeing the opposite — falling prices and large numbers of empty properties.
Per Forbes, Jianlin is the richest man in China, and his business brings in about $44 billion per year — but he has been gradually cutting back on real estate in light of what he sees as a volatile market.
“I don’t see a good solution to this problem,” he said. “The government has come up with all sorts of measures — limiting purchase or credit — but none have worked.”
What does the future hold? No one can say for certain, but with direct loans to the real estate sector at $3.6 trillion, there is a lot at stake.
Report: Vancouver Scores Highest on Global Real Estate Bubble Index
In other real estate bubble news, UBS’s so-called Global Real Estate Bubble index has cited the cities it deems to be at highest risk of being in a bubble. Topping the list is Vancouver, followed by London, Stockholm, Sydney, Munich, Hong Kong, and San Francisco.
As the Canadian dollar has weakened, the number of foreign investors in Vancouver has increased, while low interest rates and a central bank stimulus has pushed up the number of mortgages. To see the full set of data, click here.
What do you think of global market conditions? Do you see a solution to the student loan issue in sight?
Let me know your thoughts with a comment.