For a few years I have discussed the potential of a higher education bubble and the fallout it will have on the housing market. Logically you would assume that young adults with back breaking amounts of student loan debt would have a harder time taking on another giant commitment through a 30 year mortgage. At the very least this would stifle home sales from young households given that the vast majority of mortgage originations are now stemming from government backed sources that require income verification. Even with ultra low down payment programs like loans backed by the FHA many people are still struggling with the idea of saddling debt on top of already large piles of debt like a poorly played hand of Jenga. We already know housing was a bubble and we are dealing with the ramifications of the pop back in 2007. Yet the higher education bubble keeps moving higher and higher. I think viewing a chart of California home prices and the University of California tuition over the years might shed a bit of perspective here.
Higher education the next bubble to burst?
It is hard to put a price on education but this is something that we will try to do. Many young professionals view purchasing a home as their first victory in career success. But when does the cost become too burdensome? I decided to gather a few data points dating back to 1975 and tried to measure the cost of annual tuition to the median cost of a home. Below is a chart showing the median price of a California home versus the cost of attending a University of California (UC) campus for one year: Numerous charts at link
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