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The Higher Education Cost Bubble

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.


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