Millennials put off buying homes - some will move elsewhere

By Staff

October 11th, 2023

BURLINGTON, ON

During the first half of 2023, buyers had to be quick to snatch up homes amidst historically low inventory environments. This heightened competition allowed major markets to rebound closer to pre-pandemic sales and prices, however, inventory concerns were significant.

As interest rates continued to climb in the summer, buyer urgency softened. When the Bank of Canada announced its second and third rate hikes of 2023, a sense of economic uncertainty was created among buyers that slowed down sales and price growth. The silver lining to this buyer slowdown has been the build-up of inventory which has in turn led to more balanced market conditions.

 With more homes to choose from and prices starting to flatten out, will buyers return to the market as energetically as in the spring? To find out how the current real estate climate has affected buyers’ outlooks, we surveyed over 1,600 Zoocasa readers on their housing preferences and real estate plans and broke those answers down by generation.

More Canadians Are Delaying Buying a Home Due to Economic Conditions

Homebuyers have undoubtedly been impacted by inflation and our survey respondents demonstrate that with 62.1% saying they have delayed buying a home and the largest reasons for that are rising interest rates (29.4%) and high home prices (27.9%). Renters in particular, with nearly 50% being Millennials, have faced difficulties in entering the housing market. 81.1% of survey respondents who are renters say they have delayed buying a home, and of those, the majority cite high home prices as the reason.

Even across generations delaying buying a home has been a hurdle: 67% of Millennials, 69% of Gen X, and 46% of Baby Boomers responded that they have delayed buying a home. For Millennials and Baby Boomers, the largest reason was because of rising interest rates, while Gen X largely cited high home prices as the reason.

Despite this, demand is still there and 65.9% of respondents said they are looking to buy a home in the near future, with Gen Z and Millennials resoundingly answering yes at 80% and 75% respectively. It’s likely that we won’t see those buyers enter the market until interest rates start to drop, which many expect will happen in the middle of 2024, as 66.5% of respondents said they plan to wait a year or longer to buy a home. That sentiment was echoed pretty evenly across generations with 69% of Baby Boomers, 64% of Gen X and 65% of Millennials planning to wait a year or longer.

The top three types of homes buyers plan to buy are permanent homes (46.1%), smaller home/downsizing (16.4%), and investment properties (13.7%). Only 11.6% of respondents said they were planning on buying a starter home, suggesting that the majority of first-time buyers are shifting towards longer-term property types.

In fact, 48% of first-time buyers surveyed, which largely consists of Gen Z, Millenials and Gen X, responded that they were looking to buy a permanent home, compared with just 27.1% who said they planned to buy a starter home. First-time buyers were pretty split when it came to the type of home they preferred to buy with 31.7% preferring a condo apartment, 29.7% preferring a detached home, and 23.2% preferring a townhouse. This contrasts with Baby Boomers, who at 57% largely prefer to buy a detached home with the major goal being to downsize.

As unaffordability is a major concern, buyers are becoming more flexible about where they will live with 38.3% of respondents saying they would consider moving to another city in order to afford a home and 26.1% saying they would move to either another city or another province in order to buy a home. Gen X was the most flexible, with 31% responding that they would consider moving to another city or province in order to buy a home, compared with 26% of Millennials and 22% of Baby Boomers. 45% of Baby Boomers would not consider moving to another city or province to afford a home, the largest percentage of respondents.

Nearly Half of Millennials Will Receive Financial Assistance to Buy a Home

Out of all survey respondents, only 30.7% said they have or will have to receive financial assistance from relatives in order to buy a home. That number jumps up quite significantly when looking at just Millennials, with 46% saying that they have or will have to receive financial assistance from relatives in order to buy a home.

Just 28% of Gen X and 10% of Baby Boomers said they have or will have to receive financial assistance from relatives in order to buy a home. Despite this economic gap, Gen Z and Millennials’ outlook on the market is more positive than their Gen X and Baby Boomer counterparts.

30% of Gen Z and 24% of Millennials rank current housing prices as affordable, while only 15% of Gen X and 13% of Baby Boomers ranked current housing conditions as affordable. The majority of Gen X respondents ranked current housing affordability as not at all affordable and the majority of Baby Boomers ranked current housing affordability as in the middle/neutral.

Only 5% of Baby Boomers and 8% of Gen X agreed that the average Canadian could afford to buy a home, compared with 22% of Gen Z and 14% of Millennials. On the other side of the spectrum, Gen X and Baby Boomers were more united. 49% of Gen X and 41% of Baby Boomers strongly disagreed that the average Canadian could afford to buy a home, while 14% of Gen Z and 29% of Millennials strongly disagreed.

The younger generations’ optimism could also be felt in their response to whether they felt now is a good time to buy or not. 42% of Gen Z and 30% of Millennials think now is a good time to buy, with only 22% of Gen X and 20% of Baby Boomers agreeing. Gen X and Baby Boomers largely think now is not a good time to buy, at 47% and 46% respectively.

Naturally, growing up in different economic climates has impacted the way homebuyers view the real estate market. More than any other generation, 15% of Baby Boomers think it was easiest to buy a home 50+ years ago, compared to just 3% of Gen Z and 7% of Millennials. Gen Z and Millennials largely think it was easiest to buy a home 10 years ago at 45% and 36% respectively, and the majority of Gen X and Baby Boomers, on the other hand, think it was easiest to buy a home 20 years ago at 38% and 23% respectively.

If you’re like our readers and are thinking about entering the market in the near future, give us a call! We can help you prepare and plan for your future real estate goals.