President Joe Biden's administration is canceling millions of dollars in student loan debt.
With some loan relief, millions of buyers can join the housing market, a housing CEO said.
Almost a third of people said their debt has affected their decision or ability to buy a home.
Student loan forgiveness could make it easier for millions of people to join the path to homeownership, a housing organization CEO said.
David Dworkin, CEO of the National Housing Conference, called the Biden administration's plan to cancel up to $10,000 in student loan debt for tens of millions of Americans, "one of the most consequential administrative actions for housing in a generation."
"Student loan debt burden is a major impediment to first-time homebuyers," Dworkin said. "This decision will make homeownership more attainable for millions of low-, moderate- and middle-income Millennials, Gen Zs, and people of color."
Biden on Wednesday revealed his plan to cancel $10,000 of student debt for most borrowers, fulfilling a key campaign promise just days before payments were due to resume. Pell Grant recipients will have up to $20,000 of their debt forgiven, while non-recipients will see up to $10,000 wiped from their loan balances. The administration also extended the deadline for the loan repayment freeze one last time to December 31, giving borrowers four more months of relief.
The aid will directly lower one of the housing market's biggest barriers to entry, Dworkin said. A study on the impact of student loan debt by the National Association of Realtors, found that almost a third of people with student loan debt said their debt has affected their decision or ability to buy a home. Forty-seven percent of people with student loan debt said it's delaying their ability to buy a house because they can't save for a down payment, and 45% said they don't think they can get a mortgage.
Separately, an analysis from the Federal Reserve found the homeownership rate falls by nearly 2 percentage points for every additional $1,000 in student loan debt held by a borrower.
The debt relief is only for individuals earning less than $125,000 yearly or couples filing jointly and earning less than $250,000. That means the Americans left on the sidelines through the recent home-buying frenzy will finally get a leg up in the housing market, Dworkin said.
Biden's announcement also comes at a perfect time for prospective buyers looking to reenter the market. Housing market activity has cratered through 2022 as rising mortgage rates weigh on demand. Sales of new homes plummeted through July to the slowest pace in six years, the Census Bureau said Tuesday. Existing home sales have also slowed dramatically, and the number of homes available on the market has rebounded at the fastest rate since 2017.
In short, demand is cooling off and supply is quickly recovering. That stands to slow home-price inflation and even bring some deals to buyers pushed out of the pandemic-era market. Mortgage rates have also eased somewhat in recent weeks, offering even more relief to prospective homeowners.
With student loan balances poised to shrink and the market balancing out, home ownership is looking much more feasible for millions of Americans than it did at the start of the year.
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