The impact of today’s tough housing market will be felt in the years ahead as fewer children from middle-class households get on the ladder of economic success by going to college. That’s because for many middle-class households, the ability of their children to go to college, or go to a better college than they otherwise would, is directly linked to the wealth accrued in their home.
That’s the conclusion of a study just released by the Pew Charitable Trusts in which Cornell University researcher Michael Lovenheim looks at data from the 2001-2005 housing boom and finds a direct correlation between higher-education attainment and housing wealth for middle-class families.
“Higher education decisions are highly sensitive to fluctuations in family resources,” says the report, called Housing Wealth and Higher Education: Building a Foundation for Economic Mobility. “The model shows that low- and middle-income students whose families experienced increases in housing wealth just before reaching college age were more likely to attend college, more likely to attend higher-quality universities, and more likely to graduate.”
Unfortunately, there’s a negative flip side to that: “The recent housing bust and resulting decrease in wealth could negatively impact the post-secondary decisions of low- and middle-income families.”
Among the findings:
- For every $10,000 of home equity gains, the likelihood of enrolling in college increases by 6 percentage points among families with incomes below $70,000.
- The wealth generated by rising home values is estimated to increase college enrollment by 24 percent among low- and middle-income families.
- Increased housing wealth raises the likelihood of college graduation by 9 percent, lifting it to 32 percent.
Access the full report.
Access NAR’s own research on the wealth effect of home ownership.