Are Student Loans Killing Home Ownership In Bozeman?
It’s no secret that Bozeman, Montana is an expensive place to live. A vacant lot within the city limits can command a price of $115,000 to $300,00 or more.
If you’re a new home-buyer in Bozeman, and you have student loan debt, your chances of being a home buyer are very remote.
Bozeman Housing Stats
According to the Gallatin Association of Realtors in February of 2017 the average price for a single detached home in Bozeman sold for $425,216 in February 2018 that increased 15.4 percent to $490,714.
Average lots in Bozeman sell for around $100,000. If you use the rule of thumb that the cost of the lot should be about twenty-five percent of the total cost of the project, then you’re looking at a $400,000 home in Bozeman
Outside the city limits is even more pricey. The average price of a home in February 2017 outside Bozeman was $479,089. In February of 2018 that increased 26.7 percent to $606,771.
Obviously, prices will vary as to location. Condos and townhouses are not much cheaper.
Debt To Income Ratio
Lenders typically want borrowers to carry a debt-to-income ratio of 42 percent or lower, often putting a mortgage out of the range of possibility for those who already hold debt.
The lender typically is looking to see that your overall expenditures on housing and debt — including student loans and car payments — is not more than 36 percent of your income.
According to Student Debt Hero the average college student will leave school $30,000 in debt. One in five will owe more than $100,000 in student loans.
It’s doubtful that a Fine Arts Degree will provide the debt to ratio needed to purchase a $400,000 home in Bozeman unless you run the Smithsonian.
Forty-Five million American students have managed to rack up over $1 trillion dollars in student loan debt.
The student loan default rate is currently around 11.5 percent and has been rising. If this trend continues it’s estimated that 40 percent of students will default on their loans by 2023.
That would take a lot of housing money out of circulation.
Some Final Thoughts
It’s hard to estimate how much debt an MSU student leaves with because few stay here. Most leave because of income opportunities in our valley being absent.
They pack up their sheepskin and take it to the greener pastures of Seattle, San Francisco, Denver or Minneapolis for a higher paycheck and a better shot at home ownership.
Perhaps putting yourself in massive debt at the very beginning of your career is not all it’s cracked up to be. What say you?