Justin Havre put together a survey comparison of Canadian and U.S. Millennial's opinions of when they think home ownership is possible. The takeaways are:
- American young adults (18-24) are more optimistic about owning a home than their Canadian counterparts.
- Millennials are the largest generation on the planet and make up 35% of the American workforce.
- This is the fastest growing group of homebuyers.
- There is a big market in changing minds of Millennials who don't feel home ownership is possible, especially in Canada.
- Many Millennial's buying, spending, and savings habits have been a result of the mortgage crisis of 2008-2009.
- They may have deferred major life decisions but they are making them in increasing numbers.
One possible reason for Canadian Millennials being not as optimistic as their American counterparts is the level of consumer debt that individuals have created which is much greater in Canada by perhaps a factor of 5.
Canadian lifestyles are dependent on debt. Not only is there interest rate risk, there is also a USD/CAD exchange rate risk (see my June 27 post) and increasing import costs.
And as I have been tracking on my Household Debt chart, there appears to be a structural change in Canada that has led to:
- The widening spread between total household debt and household mortgages means we are borrowing even more to maintain lifestyle.
- Foreign Direct Investment OUT higher than IN over the last 20 years means Canadian companies are investing outside of Canada to get a better return on Capital and Labour. For every $1 of investment coming in to Canada, $1.36 leaves (full year 2017 data)
- Since the 4Q 2008 crash into the Pit of Gloom, the Balance of Trade has been negative for 70% of the time which means that our debt obligations continue to provide more stimulus to offshore than onshore producers.
And we still don't know about the net effects of Trump's Tariff-O-Nomics. So if you are going to leverage a home purchase with the maximum amount of debt allowed under the new stress test qualifiers, make sure you have your income contract term lengths matching up to your debt obligations.