The Housing Cycle is Entering A Big Shift In Key Cities Across North America
If you are a baby boomer, this might sound familiar: You moved out of your parent’s home as soon as you graduated from high school; you lived in a place you rented – maybe even a ‘room’ in a larger house, where you shared the bathroom with the other tenants; you could put all your belongings in one small bag; and you saved up to buy a car.
That was the ideal lifestyle of the largest demographic ever to populate the world. It’s estimated that 9.6 million baby boomers are in Canada today and they are rapidly becoming the senior population – a population whose living conditions are far different today.
But did you know that there is another demographic as big as – if not even bigger than – the Boomers? That would be the Millennials, the Gen Ys or the Echo Boomers, whose name is not the only confusing thing about them. This group has not been clearly defined, nor is there a standard criterion for categorizing them. They are born anywhere from the early 1980s to the early 2000s, depending on who is defining them.
At any rate, this age cohort has as many as seven million to 9.1 million people living in Canada – a huge demographic which has almost as much influence on trends as the Boomers have had since they were born. And many of them are in Western Canada. The median age of people living in Calgary for example is 36.4, according to Statistics Canada’s latest census numbers – the youngest demographic in Canada.
“This city is younger, so are you targeting your marketing to this younger buyer?” researcher Don R. Campbell asked close to 600 CHBA – Calgary Region members at the annual Economic Forecast dinner meeting in January. And with our in-migration at an expected record 30,000 last year, many more are coming for the jobs offered by our buoyant economy. That, the Senior Analyst of the Real Estate Investment Network (REIN™) said, will have a profound effect on the housing market in Calgary in the near future.
“There is a dramatic technical shift happening in the real estate cycle – and builders need to prepare now for what is beginning to happen, but won’t hit until 2019 or 2020,” Campbell said. That shift is occurring because of the Millennials who, said Campbell, have different ideals, different values, different priorities, and different ways of living than past generations.
Things really hadn’t changed much before this generation was born. People have had the ‘little white house with the picket fence and dog in the yard’ as their ideal dream of home ownership for decades – but other influences have changed much of that perception of that first home for today’s youth, said Campbell.
“If people build solely on what has worked in the last 10-20 years, they will struggle. The Millennials want something different.”
The peak population growth for this cohort is now at age 22, those who are moving for jobs and renting will be looking to buy at around age 31, he said. “That’s especially relevant because of the rental shortage and high rental rates here.” But here are some reasons why these young people are looking at a different lifestyle choice:
The ‘barnacles and boomerangs.’
Unlike the Boomers who moved out at age 18, the echo boomers are hanging on, living at home much longer or coming back once they have moved out. “They are staying home and want to buy, not rent, a home. Affordability is an issue, even with the high incomes.”
Location is a factor.
Again, unlike the Boomers, who have adjusted to long commutes to more affordably-priced homes in the suburbs, the Gen Ys will sacrifice size of homes for smaller apartments and condos closer to work to have more quality time after hours. “As an example Calgary has a ‘C’ rating for transportation now,” he said. “The average commute in Calgary is 67 minutes.”
The desire for ‘villaging.’
This demogra[phic wants to spend time walking to ‘socializing’ spots, restaurants, coffee shops, entertainment venues, parks, and recreation. They want variety and uniqueness in their own neighbourhoods.
More and more of these young people are not driving cars so they want to live near transit or C-Train stations or, even better, close enough to walk to work.
They are used to living in their parents’ homes, so they are used to ‘nicer’ things – not starting out with the cement-block-and-plank bookcases the Boomers first had. “They want nice countertops etc.” They will soon be able to have the choice of any job they want because of the job shortage when the Boomers retire, so they want new, nice and practical.
The first house they buy may, indeed, be a condo, either apartment or townhouse. But don’t be fooled into thinking the tiny, one-bedroom unit is the best choice for this demographic because of price point, said Campbell. “These will be the ghettos 10 years down the road. No-one will want them. Even when they buy, they’ll want two bedrooms to share costs with friends or tenants. Even three bedrooms to have one for an office.” And no surprise, of course the homes must all be tech savvy – with all the latest to attract, and keep, this generation happy.
Campbell’s comments resonate with Price Waterhouse Coopers survey – Emerging Trends in Real Estate. Here is part of the report that, although it deals more with commercial real estate, shows the importance of this demographic group:
"The growth of Generation Y and its impact on all sectors of commercial real estate could be the singular most dominant trend for many years,” says the report. “This group lives, works and plays in different ways than previous generations. The impact will be felt by all real estate sectors. This generation will be more urban and less suburban; they won’t want to drive as much but will want to be mobile. From in-town rental housing to collaborative office space, to close-in warehousing to ensure same-day delivery from online retailers, Gen Y will be a noticeable force shaping commercial real estate. All of these trends will have significant impact on real estate. Referred to as a ‘powerful engine’ by one investor, this generation will be ‘very good for real estate.’”
It’s a winning combination for those astute enough to take advantage of the opportunities now before the real shift happens, said Campbell.
“The cycle is changing, and it kicks in now, so you can be ahead of the trend,” Campbell said. Are you ready?
Kathy McCormick has been writing about the new home and residential construction industry in and around Calgary for more than two dozen years as a newspaper reporter for the Calgary Herald and Calgary Sun. She is now the communications director with the Canadian Home Builders’ Association – Calgary Region and editor of Profile, the Association’s official magazine, where this article was first published.