Desperate home builders seeking Millennial buyers by offering to subsidize their student loan debts
With the Housing Bubble 2.0 really beginning to cause stagnation in the real estate markets, one home builder appears to be more desperate than ever to try to entice Millennials out from Mom and Dad’s basement and into a new home.¬† And what they are focusing on is a way to shift their student loan debts into mortgage debt by offering to pay off a portion of their loans if they put money down for a new home.
Homebuilder Lennar has come up with a genius strategy to partially eliminate the massive bubble in student loans that has crippled recent graduates and forced them into a life devoid of the American dream of home ownership…it’s a “two birds with one stone” kind of solution.¬† Yes, rather than struggle to make those monthly student loan payments, Lennar has developed an “innovative mortgage” designed to allow millennials the opportunity to convert their student debt into an “investment” in America’s “Housing Bubble 2.0.”
So how does it work?¬† According to the¬†Wall Street Journal, Lennar is set to introduce the new promotion tomorrow that will make a payment on a buyer’s student loans, equal to 3% of their purchase price up to $13,000, in return for purchasing a new Lennar home…it’s as simple as that.
Student-loan debt has been an obstacle for many potential home buyers. Now, Lennar Corp. is trying to do something about it.
A subsidiary called¬†Eagle Home Mortgage¬†plans to introduce on Tuesday a program under which Miami-based Lennar will pay off a significant chunk of the student loan of a borrower who purchases a home from them.
Housing observers said other builders are likely to look to mimic the program, which could help lure more of the critical first-time-buyer segment into home purchases.
‚ÄúObviously there‚Äôs a benefit to bringing more people into the home buying market. We‚Äôre trying to design something here that supports affordability and creates that path to homeownership,‚ÄĚ¬†said Doug Cropsey, a senior vice president at Eagle.
Lennar will make a payment to a buyer‚Äôs student loans of as much as 3% of the purchase price, up to $13,000. The contribution doesn‚Äôt directly increase the purchase price of the home or add to the balance of the loan. –¬†Zerohedge
As of February of this year, student loan debt levels were at a whopping $1.3 trillion, and default rates were starting to creep up to nearly 10%.¬† And when you couple this with the fact that very few good paying jobs have been created during the so-called ‘economic recovery’, even with this unique incentive to buy a home it still doesn’t address how many can actually afford to then make mortgage payments.
The¬†data is actually pretty scary:¬†44% of college grads in their 20s are stuck in low-wage, dead-end jobs, the highest rate in decades, and¬†the number of young people making less than $25,000 has also spiked¬†to the highest level since the 1990s. –¬†Forbes
Getting Millennials into real estate is one of the biggest untapped markets for home builders to try to crack, but the industry has too many negatives right now to really accomplish this feat.¬† And with more and more analysts expecting a new recession to hit anytime soon now, the potential for another round of foreclosures is more likely than being able to get individuals and families to invest in a home during a period when prices are just as expensive as they were in 2007.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.