College Graduates & Real Estate- a case to be made today

The average starting salary for a bachelor's degree graduate stands at $44,259, according to the September 2012 issue of Salary Survey, published by the National Association of Colleges and Employers

2012 U.S. household consumer debt profile:

• Average student loan debt: $34,703

The unemployment and underemployment rates are astounding for college graduates. 

In fall 2012, a record 21.6 million students were expected to attend American colleges and universities.

Not a perfect analysis but let’s say that the 21.6 million students are split evenly from 2008 - 2012. Thus, approximately 5,400,000 students are ready to graduate each year. On the average, about 56% of those students graduate. NOTE: my estimation on the low side.

The number of graduating students per year would be 3,024,000.

On the average since 2008, the student unemployment rate is around 8%.

(2,782,080 students graduate over the past 4 years = 11,128,320) – that found a job!!

About 5,000,000 jobs were created over the past 4-years for the 11,000,000 new  graduates that found a job and they were in competition with unemployed workers with experience for these jobs!

NOTE: by the way, I don’t believe new college graduates that are included in the 8% that can’t find a job are NOT added to the unemployment rate – they never had a job!

 

 

If you are in your 20’s, the possibility of taking advantage of low interest rates to buy a home is a fleeting opportunity due to college debt, low starting salary or NO job.

In my opinion, graduates that were lucky enough to find employment over the past 4-yrs need to strive and buy a home sooner than later. Why? 

A home is a hedge against inflation,

Provides a savings account opportunity

Your home will appreciate in price over time

You will not be subject to rent increases.

However, the starter home will not be purchased by first time homebuyers but by those previous buyers that went through foreclosure and short sales. This only makes starter homes even more difficult to find.

I think most college graduates will consider buying a home as a commitment and unattainable goal. Both of which will not be considered a positive by them but should be by their families. And the situation will not get any better for them in the short term and perhaps even longer as there is NO light at the end of the tunnel – only more darkness.

If you know a recent grad and they have a job, you should advise them to purchase a home. The problem is the down payment and not the ability to pay a mortgage. After all, the mortgage payment will be less than their apartment but for not much longer.

Interest rates have already ticked up significantly and I am not sure they will stop.

The Fed can’t afford to stop using their credit card and they can’t afford to continue to use their credit card – a NO WIN situation!