Long Road Ahead for Young Adults

"Today's youth are growing up in an era of complexity and uncertainty. Changes have delayed, or even destroyed, the landmarks that once signaled a transition from one phase of life to another."
-vitalsignscanada.ca

The dream is to own a home. You work really hard to graduate college or to learn a trade and then you save up enough for a down payment on your first home, sounds simple enough. However, buying a home gets tricky. If you live in Calgary it's a challenging task, becoming more challenging in the last five years or so. For many young professionals, people aged 20 to 29, the dream of owning a home is a long way off. Many things have changed since our parents bought homes and we face many more obstacles on the path to one of the greatest declarations of independence. With interest rates remaining low, this path is eased slightly and could be one of the reasons home ownership is possible for some people in the aforementioned age range.

According to a 2012 Canadian Municipal Housing Corporation (CMHC) mortgage consumer survey, the average age of a first-time homebuyer in Canada is 34. In the 1960's, in the UK, the average age was 24. This trend can be attributed to many things and we leave you to draw your own conclusions but this blog shares some insights.
Statistics Canada, from the 2011 census results, found about four in 10 young adults live in the parental home — in Calgary specifically it is less than 35 per cent or roughly 59,818 young adults (those aged 20-29).

Two of those young adults living at home are Caitlin and Angela. Both have graduated with a BA in Communications this past July from Mount Royal University. Both live with their parents, who are supportive of them living at home and both have plans to move out but see obstacles along the way.

For Angela, one of her major obstacles in buying a home or even moving out to a rental property is financial. Angela currently works in a part-time position and is actively seeking a full-time career path. "If I'm lucky I'll have a full time job in the next few months," she said, but because of circumstances she hasn't "felt stable enough to consider moving out."

Young adults in Canada are having a more difficult time in the job market. According to a Globe and Mail article, the current jobless rate for 15-24 year olds is 15 per cent, the highest in nearly two years. A broader measure of youth unemployment that includes discouraged job seekers and involuntary part timers sits at 19.6 per cent, the highest level in 15 years.

Alberta is ahead of the rest of Canada in terms of unemployment for this age group and job prospects. Currently, the rate among 20 to 24 year olds, across Canada — in temporary jobs in the first eight months of 2012 — was 28.6 per cent. Fortunately in Alberta the unemployment rate in the 20-24 year old bracket sits at 5.6 per cent.

There are good things to take from the changing trends in Canada. Full-time university enrollment is at its highest rate ever, but unfortunately this is leading to young adults beginning their adult lives with more debt than ever before. The average cost for tuition in Alberta has gone up 275 per cent between 1991 and 2007 and now averages 14 years to pay off according to #generationflux.

A BMO report states the average cost of a four-year degree, including tuition, school supplies, housing and other expenses amounts to roughly $60,000. You could take former presidential candidate Mitt Romney's advice and borrow from your parents but that may not be an option.

Combining the fact that young adults in Canada are trending towards higher education, we can also assume they are trending towards large amounts of debt before they enter the job market.

The latest statistics from CREB® put the benchmark price for a single-family home in Calgary at $433,300, a condominium apartment at $247,000 and a townhouse condominium at $279,000.

For Caitlin, she would like to buy a home "definitely within the next five years." At the very minimum requirement for a down payment of 5 per cent, she would have to save $12,350. Angela stated that while she is not looking she also doesn't know what expensive is. The chart below shows the down payment needed for October 2012 benchmark prices.

Simply Hired puts the average entry level salary at $43,000. Once you have taken out taxes and other expenses, the money left to live on is significantly lower making saving 20 per cent nearly impossible for a single individual in the near term. Putting aside the 20 per cent, a level at which having mortgage insurance is no longer required and costing home owners less overall in interest, even getting a 10 per cent down payment will take a significant amount of time.

While Angela puts off the idea of homeownership because she believes that ability to get approved for a mortgage is nonexistent, Caitlin has put some thought into attainable homes/income based housing. While neither is actively searching for a place or educating themselves on mortgage rules, both have excellent educational backgrounds and are in a city that is creating excellent opportunities for its citizens.

One of the major points to be made is that with all of the obstacles young adult Canadians face in buying their first home, there will be economic consequences for Canada as a whole. Many large purchases are tied to owning a home. A washer and dryer, a car, a lawn mower, kitchen appliances, etc. are items that one generally buys after buying a home. If there is less ability to buy a home these items will not be purchased.

Other questions to be considered before buying a home include:

- Is Calgary where I want to be? It is very easy to move around Canada and the world nowadays.

- Do I plan to add family members in the next few years? Family planning is important for most young adults.

- What amenities are important to me? Young adults may want to focus on inner-city locations.

- What costs are associated with the home I buy? Is the home new, renovated or a fixer-upper?

Students Stressing More Over Finances Than Academics - BMO Financial Group

Save up For a Down Payment? The Young Adult's Struggle - Globe and Mail

Canada's Young and Underemployed - Globe and Mail

Generation Nixed: Why Canada's Youth Are Losing Hope for the Future - Globe and Mail

Family Canada Census 2011: Canadian Young Adults Still Living at Home - HuffPost Living

#GenerationFlux - Vital Signs Canada

#GenerationFlux Video - Vital Signs Canada

First Time Home Buyers Reflect on Their Rookie Mistakes - TD Canada Trust

Census Map - StatsCan

2012 CMHC Mortgage Consumer Survey - Canadian Mortgage Trends.com

Average Entry Level Salaries - Simply Hired