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Low mortgage rates and good jobs helped first-time homeowners enter the market, but Generation Y is now wary of prices as the market moves into bubble territory. (Fred Lum/The Globe and Mail)
Low mortgage rates and good jobs helped first-time homeowners enter the market, but Generation Y is now wary of prices as the market moves into bubble territory. (Fred Lum/The Globe and Mail)

Why Canada’s cult of home ownership is in trouble Add to ...

Despite all the financial obstacles they face, young adults have been eager believers in home ownership. Now, they’re thinking more critically about houses.

That’s the sense you get from the twentysomethings in Richard Harris’s fourth-year urban housing class in the geography program at McMaster University in Hamilton. For the second year in a row, Prof. Harris has given his students a fall assignment to construct an argument for either buying a home or renting.

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“Last year, in a class of 29 students, a clear majority said they would buy,” Prof. Harris wrote me in an e-mail. “I was surprised because I had spent a lot of time speaking about the dangers of price bubbles, and about the opinion of most experts that the markets in many Canadian cities had moved, or were moving, into bubble territory.”

This year, only five of 23 said they’d buy and 18 chose to rent. “Although the assignment was the same and the content of my lectures pretty much the same, the pattern of response was very different,” Prof. Harris wrote.

While the size of his class is too small to be statistically definitive, Prof. Harris considered the swing in opinion noteworthy. It’s all that and more if you want to understand where our housing market is heading in the years ahead.

As aging baby boomers start to consider downsizing their homes, young first-time buyers will become increasingly important to the housing market. They’ve certainly shown the will to buy homes in the past two decades. Despite a weak job market for young workers and high student debt levels, young adults have streamed into the housing market.

Data supplied by Steve Pomeroy, a housing consultant and research associate at Carleton University, show that home ownership rates among people aged 25 to 34 rose from 45.8 per cent in the mid-1990s to a historic peak of 52.4 per cent in 2011. Home ownership levels in the entire population also increased, but not quite as much.

“The relative success of many young households in what most perceived to be overpriced and unattainable housing markets is both surprising and remarkable,” Mr. Pomeroy wrote in a report posted on his blog.

Low mortgage rates are a major reason that young people were able to get into the market, he said. But some also benefited job-wise from the strong economy until 2009, and looser mortgage rules of the previous decade helped, too. Anyone remember 35- and 40-year mortgages?

Mr. Pomeroy said it’s important to note that only half of younger households benefited from these conditions. The rest continue to struggle to find the jobs and wages that will get them into the housing market.

Even so, Prof. Harris was just a year ago presiding over a classroom dominated by home ownership true believers.

It would be overdramatizing things to say the students have turned against home ownership. Really, they’re just thinking more critically about it.

Prof. Harris’s assignment asked students to imagine they have a job offer in another city that will require them to remain for at least five years, and that a generous aunt would give them enough cash to cover a 20-per-cent down payment. Would they buy a house, or rent?

Seven of Prof. Harris’s students agreed to share their assignments with me. (Read excerpts here.) Those arguing for renting did so in large part because the assignment stipulated a five-year minimum commitment to their new job. The students sensibly thought they might move to a different job afterward, and home ownership would make them less mobile. Other arguments against home ownership were the belief that prices might fall, and the lack of affordability.

Last school year, Prof. Harris’s students virtually dismissed all of these reasons for not buying. The mass change of mind in his class could be a statistical freak, but that seems unlikely after a year of intense media speculation about the housing market’s future. These students seem to have decided that home buying isn’t the no-brainer move that last year’s class thought it was.

Canada’s cult of home ownership may be in trouble here. Remember, these budding housing realists haven’t yet entered the adult world. They haven’t felt Generation Y’s frustration in landing well-paying jobs and building careers. They’re not directly acquainted yet with unpaid internships and the problem of under-employment, and they haven’t yet tried to start their adult lives while paying back student loans. Their real education on the feasibility of buying a home has not yet begun.

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