Gen Y clients pose challenge for brokers

Gen Y clients pose challenge for brokers

Gen Y clients pose challenge for brokers Millennials may actually have more financial advantages than their parents, despite constant reports to the contrary. Except when it comes to purchasing a home.

“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."
  • Layth Matthews 2014-05-21 12:49:06 PM
    I became a mortgage broker because I wanted to be a financier of appreciating assets. I think real estate is still a good investment in some markets, but it's tough to be an advocate in markets skewed by the whims of exogenous demand - and that could be all of Canada for a long time. It's not so obvious that millenials should be keen on home ownership. It's much more of a strategic decision than it used to be. Investing and financing is all about timing. If there are no obvious bargains available, it's better to wait and accumulate - or de-leverage - to position yourself for the next huge opportunity. Sorry, I was just talking to myself, again.
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  • Ron Butler 2014-05-21 2:14:04 PM
    @ Layth ....... you are not talking to yourself. I think the same thing most days. Ex-Pat money changing the whole real estate eco-system in some neighborhoods. Not saying it is unfair but it is not like living in a place where local supply and demand inform the marketplace.
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  • Paul Burns 2014-05-21 7:19:34 PM
    As the proud papa of three millenials in the process of finishing up University I worry about how student loan debt will affect their buying power. My eldest just finished law school, and he should have decent earning power in a few years, but his student loan payment will be in the range of $900 per month. In NB, that's a pretty decent mortgage payment itself. It will be a few years before he is buying a home of his own.
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