“The average house price was 10.4 times the median income of young families in 2011, more than double the ratio of thirty years ago, relative to income,” a recent BMO report states. “Despite double-digit mortgage rates in 1984, young homeowners today must pay more to service a mortgage.”
Much ado has been made about the financial hardships Millenials (those born between 1981 and 2001) will endure over the course of their lives. But the BMO report suggests this isn’t the case; except when it comes to buying a home.
"There is a popular notion that Millennials will become the first generation to do worse than their parents economically," said Sal Guatieri, Senior Economist, BMO Capital Markets. "However, apart from taking on bigger loans to buy pricier homes, young Canadians today enjoy better job prospects, earn more and are wealthier than in the 1980s."
Unsurprisingly, the report also found that many Millenials will face difficulties buying a home in Toronto and Vancouver – where large amounts of debt are needed to fund purchases in these hot markets.
This could be worrisome for mortgage brokers, with the millennial generation expected to bolster the housing industry for years to come.
Still, Millenials are expected to find their financial footing and have more buying power than their parents which, of course, will aid in purchasing a home.
"Having two per cent more buying power doesn't sound like much, but the difference adds up over time," noted Mr. Guatieri. "One caveat is that median income was higher in the 1970s, before the 1980s' recession took a severe toll on workers, so the starting point for our comparison matters."
Millennials may actually have more financial advantages than their parents, despite constant reports to the contrary. Except when it comes to purchasing a home.