Falling home values hinder wealth growth while older homeowners gain
Millennials in Canada are experiencing a decline in wealth compared to other generations, primarily driven by recent challenges in the real estate market, according to new data from Statistics Canada.
The data reveal a 6.48% drop in millennial household wealth over the past year, bringing the average to $493,423. Meanwhile, Gen X, baby boomers, and pre-1946 households have continued to build wealth, with their net worth growing to $1,485,654, $1,397,609, and $528,699, respectively.
Real estate has been a major factor in this wealth gap. Unlike previous generations, millennials who bought homes during the low-interest rate period of 2020-2021 are now seeing values dip.
Millennials’ real estate holdings fell nearly 9% over the past year, compared to a 2% drop across all households. Many millennials purchased homes during the low-interest years of 2020 and 2021, only to see property values decline by over $100,000 since early 2022.
Toronto-Dominion Bank economist Maria Solovieva explained that these market shifts have hit millennials harder than other generations, particularly those who recently bought homes at higher prices and lower rates.
According to recent Canadian Real Estate Association data, the benchmark home price dropped from a peak of $852,000 in March 2022 to $713,200 as of September 2024.
Meanwhile, older homeowners who bought decades ago have seen their properties steadily appreciate.
Hesitation and high barriers
With high home prices and rising interest rates, many millennials who haven’t yet bought a home feel stuck.
RBC economist Carrie Freestone explained that the current market conditions are creating obstacles for younger buyers, leading many to question whether homeownership is even a viable option. Those who did buy during low-rate periods are now facing higher renewal rates and payments, making it more challenging to keep their homes.
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“This is a group that is at a disadvantage,” Freestone explained, noting that earlier generations relied on homeownership to build wealth. For millennials and Gen Z, however, high entry costs and rising rates create obstacles.
Freestone added that Canada lacks alternative ways to build wealth comparable to homeownership, leaving millennials and Gen Z at a disadvantage in the traditional wealth-building landscape.
Savings and investment
Financial planners like Cindy Marques suggest that millennials take a different approach to financial stability. Rather than stretching to buy homes early, she advised younger Canadians to focus on aggressive savings and investments.
Certified financial planner Cindy Marques, who specializes in millennial clients, has seen these financial challenges firsthand. She noted that many millennials are focused on saving aggressively and cutting back on consumption, as Statistics Canada data showed they’re the only generation that has ramped up savings while reducing spending.
Despite high barriers to homeownership, Marques is optimistic, emphasizing that early and consistent saving can yield substantial returns over time.
“I don’t believe building wealth is out of the picture for (younger Canadians),” Marques told The Financial Post, encouraging millennials to prioritize retirement savings before purchasing a home.
She estimated that a 25-year-old who begins saving now could end up with $250,000 more by retirement than someone who starts a decade later, thanks to the power of compound interest.
“It might be an unpopular opinion, but I have long been advocating for aggressively trying to save up in your earlier years to put a down payment on your financial freedom, i.e. retirement or the ability to live life on your own terms, before buying a home,” Marques said.
“You have $100,000 by the time you hit 30 and you let that grow, that’s going to result in substantial assets by the time you’re looking to retire or do something different with your life.”
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