Many millennials drowning in student debt are readjusting their expectations of homeownership.

Jonathan Bachman/AP
July 13, 2015 3:59 PM

Millennials aren’t too cool to buy. Nor have they embraced renting as a new lifestyle choice after seeing their parents struggle with the real estate crash and Great Recession.

Rather, millennials want to buy, but in too many cases, they just can’t afford to because they are buried under a mountain of student debt, new research shows.

The amount of student debt among consumers under 30 is staggering, having more than doubled to $369 billion, up from $146 billion in 2004, credit-rating agency Equifax reports.

All that debt, in turn, is making his millennial buyers extra cautious, notes Rich Hornblower, an agent in the Back Bay office of Coldwell Banker Residential Brokerage.

“I’ve talked to my mortgage people and that has been a factor with a lot of people,” Hornblower said. “The student debt does cut into their buying power. That is on people’s minds.”

Lowering expectations

Hornblower said his millennial buyers who have student debt are buying less expensive homes than what they would otherwise afford.

Some buyers are looking in the $300,000 range, even though they have been pre-approved by their lender for $400,000, while others are sticking with $500,000, even though, in theory anyway, they could afford $600,000.

There is a significant difference, in turn, for what you get at the lower price ranges compared to being able to spend an additional $100,000, Hornblower said, and it’s not just a house that is in better shape.

Spending “$400,000 gets you an extra bedroom – it might get you a parking space,” he said.

As they look for homes and condos in more affordable ranges, millennial buyers are gravitating towards less expensive but up-and-coming zip codes like East Boston and Dorchester’s Ashmont section.

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Yet one thing Hornblower hasn’t seen is a drop off of interest in buying, a reflection that is backed up by some of the latest stats.

More than half of millennials – 53 percent – said homeownership is a priority, according to a recent MacArthur Foundation survey.

That’s actually significantly higher than the nation as a whole, with just 43 percent of all those surveyed putting as much stock in homeownership.

A “dampening effect”

That said, stats from the Federal Reserve Bank of New York and Equifax highlight the dampening effect student debt is having on millennials’ home-buying dreams.

The average student debt load has skyrocketed since 2004, to $27,000, or a 74 percent increase over a decade ago, when it stood at $15,000. A small but significant slice of all borrowers—1.8 million – have debt totals nearing $100,000, according to Fed and Equifax stats.

As student debt has risen, the amount of mortgage debt – and the home buying that it represents – has fallen.

Just below 21 percent of those under 30 with student debt also had mortgages in 2014, down from just over 33 percent in 2006, according to the New York Fed and Equifax.

Despite their big student-debt loads, millennials haven’t given up on the American Dream, though it may take longer to achieve, one expert notes.

“Importantly, large amounts of student debt and less-than-stellar job prospects for recent college graduates make the dream of home ownership shine less brightly than in the past,” said Dennis Carlson, deputy chief economist at Equifax, in a press release. “But we also see indications that they will eventually want the family, the car, and the house that older generations desired, just with a significant delay.”

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