Millennials are doing their homework before entering housing market

We sometimes hear that millennials are detached from the realities of the marketplace with no interest in assuming the responsibilities of homeownership.

But the numbers show otherwise, said David MacDonald, group vice-president of financial services with Environics Research Group, which conducted a study on first-time homebuyers on behalf of Genworth Canada.

“They have embraced the dream of homeownership,” said MacDonald. “Whether they are born abroad or within the country, it’s an aspiration. They’re well educated and financially literate, and they’re doing their homework before entering Canada’s housing market.”

Millennials will form 50 per cent of the workforce by 2020, said Tod Maffin, president of engageQ Digital, an agency specializing in social media. They have a hopeful and optimistic outlook, and they need meaningful work to be challenged. They’re also more influenced by YouTube than TV. They are hyper-connected and hyper-informed. Many of them have no landline; 83 per cent of millennials sleep with their mobile device.1

“They might be the most well-educated generation in history, but they’re finding limited career prospects,” said Maffin. “They’re graduating with enormous debts, and earning less than the previous generation.”

Despite this, by 2018, millennials will have the largest spending power of any other generation, he said. They grew up reading “The Wealthy Barber” and watched their parents go through a recession, so they’ve also learned to be fiscally responsible.

Indeed, first-time homebuyers are making responsible financial decisions when entering Canada’s housing market, according to the 2015 Genworth Canada First-Time Homeownership Study.

“We wanted to focus on the millennials because they really are the engine of growth in the economy,” said MacDonald. “Just as boomers before them changed every facet of the marketplace, millennials are doing the same thing.”

First-time homebuyers tend to have higher incomes than the general population; they also tend to work full-time, hold post-secondary education, and are married or in a relationship. And they typically consult with a mortgage professional to purchase a home within financial reach.

Seven in 10 respondents say they used their non-registered savings account to obtain a down payment, while four in 10 used the Home Buyer’s Plan through their RRSPs.

But the road to homeownership isn’t paved with gold bricks, said MacDonald, adding that 39 per cent of respondents are concerned about making ends meet month to month. Top concerns were loss of a job, rising interest rates and unexpected household repairs.

But the majority — 79 per cent — were confident in their long-term financial health.

“They’re taking steps to pay off their mortgage more quickly,” said MacDonald. “Half of first-time buyers said not only were they able to pay their bills, they were able to save money.” One-third have doubled up or accelerated their mortgage payments, while 26 per cent have made a larger once-a-year lump payment.

They’re also conscious of the need to manage their debt burden, with 57 per cent of respondents taking care to avoid additional debt since buying their home.

“The key takeaway … is that first-time buyers who’ve gone through the process of buying a home are feeling very confident,” said MacDonald, “and this bodes well for the real estate market in Canada.”

1 http://www.nielsen.com/us/en/insights/reports/2014/millennials-breaking-the-myths.html

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