It took longer than expected, but the time has arrived: millennials are now the largest cohort of homebuyers. In 2018, almost half of first-time buyers in Canada were millennials. But that doesn’t mean that baby boomers are settled into their forever homes. Baby boomers plan to remain in the real estate market, with many planning to buy new homes in the next few years.
Table of Contents - Millennial's Versus Boomers: How Different Generations Approach the Home-buying Process
Baby boomers and millennials haven’t always gotten along. Each generation is guilty of criticizing the other for their financial and cultural decisions. That’s likely because millennial's are often the children of baby boomers. Still, the desire to find an affordable home that fits their needs is something both generations have in common. Baby boomers genuinely want to see their younger counterparts achieve this milestone.
Here’s how the two generations approach the home-buying process and what it means for real estate investors of all ages.
Millennials have to save longer to afford a home
It’s easy for previous generations to assume that younger buyers are simply unwilling to save enough money for a down payment. Think-pieces with click-bait headlines claim that millennial's are too occupied buying avocado toast and oat milk lattes to properly save for a home. This complaint ignores the fact that housing affordability has changed drastically in the last few decades. Couple this with the fact that the average Canadian leaves university with $26,000 in debt, and homeownership seems impossible for many millennial's.
In 1976, the average home-buyer only needed to save for five years to be able to afford a down payment on a home. Today, the average millennial has to save for 35 years for a 20 percent down payment on an affordable home.
Boomers remain in the housing market
According to real estate company Royal LePage, more than 1.4 million Canadians between the ages of 54 and 72 are planning to buy a house within the next five years. Boomers are searching for homes that will fit their plans. Typically, they are looking to downsize or are searching to leave urban areas for quieter living.
Downsizing could create some relief for millennials and the oldest members of Generation Z who are looking to buy their first homes for their families. However, if boomers are moving to condos and other smaller housing, it could create a crunch for young families and immigrants who could not afford other housing types.
Regions across Canada are experiencing a housing crunch. Supply has consistently been unable to keep up with demand, which raises prices. When older generations don’t move, there isn’t enough supply for young families to move into larger homes.
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Boomers are helping their millennial children
One major factor impacting whether boomers can downsize – and where millennials are living – is the number of adult children living with their parents. According to a Royal LePage survey, 44 percent of baby boomer respondents still have children living with them. Twenty percent of those respondents think that their adult children won’t move out until age 30, exacerbating housing goals for both generations.
Baby boomers have more wealth than any other generation in Canadian history, so the home-buying experience throughout their lives has been different than it has for other generations. While some may not understand what younger generations are facing, others are quick to help their adult children. Baby boomers strongly value homeownership and are prepared to help their children make a down payment.
Rather than treating the situation as an ungrateful child failing to launch, many boomers are sympathetic to their child’s plight. Many parents feel their children are making a responsible decision to save money at home, rather than paying rent and not earning equity. Without this opportunity, plus any additional financial support from mom and dad, homeownership would be unrealistic for some millennials.
Mortgage payments remain the same
While it may be harder for millennial's to save for a down payment on a home, monthly mortgage payments have remained roughly the same when adjusted for inflation. Baby boomers, Generation X and millennial's have made similar payments over the past 40 years. The minimum down payment required has decreased from 10 percent to 5 percent, which has also taken some pressure off of first-time home-buyers.
Appealing to boomers and millennial's
These changes in home-buying patterns impact the availability of investment property, home prices, rental prices and rental demand. As everyone’s home-buying plans are in transition, investors have an opportunity to buy properties that will be in high demand in the coming years, and to create rental units that meet a variety of needs.
Millennials are looking for amenities beyond the floor plan and the details to be attracted to a rental. They want to be near vibrant areas with plenty to do, including exercise, nature, restaurants and culture. Even millennial's who wish to move into single-family homes in the exurbs want these urban amenities. Ultimately, they want to participate in a community. Millennial's also value green building and eco-friendly amenities that help them minimize their carbon footprint. Buying a property in these areas and/or adding these amenities will attract millennial renters.
Boomers are eager to downsize, and many are willing to rent to do so. Renting offers them the flexibility to relocate if desired. They don’t have to worry about selling a home yet again if they need to move in with family or into an assisted living facility when the time comes. They like the convenience of having a landlord who will handle any maintenance and repairs. Additionally, baby boomers have more wealth, which they may wish to invest in something besides real estate.
Renters come from all backgrounds and represent different generations. They have different needs and different plans for life beyond renting your property. It’s important to understand how Canadians are thinking about home-buying and what it means for your investment strategy.
How is home buying different for younger generations?
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