Will the End of the Student Loan Moratorium Affect Housing?

With the student loan moratorium set to end next month, U.S. consumers are taking a hard look at their monthly payments and spending. For those already struggling to afford monthly mortgage payments and rent payments, in addition to other loan payments, grocery bills, and additional expenses, the return of student loan payments is a challenge.

A recent survey by Credit Karma revealed that 56% of student loan borrowers say they’ll soon have to choose between loan payments or necessities such as rent and food. In addition, 45% of borrowers surveyed expect to go delinquent on their loans when payments resume, InvestorPlace reports. As more Americans become cost-burdened in the wake of resumed student loan payments, experts fear the housing market could be headed for a downturn.

According to Michael A. Gayed, publisher of the Lead-Lag Report and portfolio manager at Tidal Financial Group, the return of student loans represents a bearish catalyst for the U.S. real estate market. In an interview with InvestorPlace, Gayed offered some insight into the interconnected nature of consumer activity as it pertains to housing:

“It takes time for people starting to realize that, wow, now their interest rate on their credit card went from 20% to 25%, then maybe 30%. Who knows after that, based on where rates are going. So under that setup, it’s only a matter of time until consumers start to realize that they have to cut back on their discretionary spending. Now, if I’m right about that too, combined with the student loan payment resumption, very suddenly then, I suspect you’re going to have consumers really pulling back almost all at once, because they start realizing that their cash flow is not what it once was. You get that, I promise you, unemployment rises. You get that, I promise you housing prices will start going down.”

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