# No house until 36

It’s hard to blame the millenials for living in their parents’ basement when they were suckered into taking out student loans on which they cannot, unlike previous generations, default. Karl Denninger spells out the math:

You mean the \$500 a month student loan payment is half of a decent first-time homebuyer payment — or more?

Well, yes.  Never mind that \$500 a month x 12 months = \$6,000 a year saved toward a down payment, and if you put 20% down (which you should) then four years of that savings would make it possible for you to buy a \$120,000 house.

Financing \$96,000 @ 5% for 30 years gives you a P&I on that \$120,000 house of…. \$513.21, or awfully close to that student loan payment.

In other words you forego the ability to buy the house by taking the student loan debt.

And for how long do you forego it?

10 years, plus four more to build the down payment, or 14 years post-graduation.

If you graduate in four years (ha!) you’re 22, so this means you’re not buying a house until you’re 36.

The Law of Unintended Consequences strikes again. The mortgage banks are complaining about the collapse in demand for mortgage debt because indebted graduates and non-graduates can’t afford to take on the debt required to buy a house.

Everything is as my modification of the Austrian Business Cycle predicted. The limits of demand are the limits of CREDIT.