The rapid escalation in housing prices has disadvantaged millennials who started their working lives with wages that failed to meet housing affordability thresholds, but they are increasingly leveraging digital solutions to compete in tight markets.
First-time homebuyers, the majority cohort of those buying a home in Canada, are mostly younger households transitioning from renting or living with their parents. In the United States, millennials comprised the largest share of homebuyers at per cent, according to the National Association of Realtors NAR.
A recent commentary noted that “millennials have aged into the housing market at the worst possible time.” Rising home prices and the persistent imbalance between supply and demand have frustrated millennials who typically lose bidding wars to older, wealthier buyers.
But not all is lost for the millennials. Historically low-interest rates imply that their monthly mortgage costs will be relatively affordable despite the higher purchase prices. Unlike older cohorts, much of their mortgage payments will not be consumed by interest payments.
The digitization of the real estate sector, with the internet enabling digital marketplaces for listing homes, applying for mortgages, paying for services and more, has also benefitted millennials because they are more likely to readily adopt digital solutions.
An Ipsos survey last year for the Ontario Real Estate Association showed that per cent of Ontarians reported their first step in homebuying was searching online for homes, and six per cent started by visiting online open houses. Only per cent indicated they started by contacting a real estate agent.
The most consulted source for information was Realtor.ca, a web portal associated with the Canadian Real Estate Association, which recorded a whopping million visits by million visitors in . But younger buyers are more likely than others to consult kijiji.ca and zillow.ca.
More real estate portals have recently emerged in Canada. For example, Zolo is a Canadian digital real estate platform that registered million visits to its websites and more than million page views. Zolo has , users every day and around per cent of those visitors are between the ages of and years, while another per cent are to years old.
Women homebuyers are adopting digital solutions at an increasing rate, too. Zolo reported that women outnumber men in daily visits to their portal, accounting for per cent of the visits.
The pandemic has altered the locational priorities of homebuyers, including millennials. Buyers, in general, are searching for homes with more living space and backyards, while millennials, being cognizant of the increased opportunity to work from home, searched for dwellings in areas with fast and reliable internet. Almost one in four Ontario millennials expressed a preference for homes in places with better internet service compared to just nine per cent of those aged years or older.
Furthermore, most older buyers indicated a preference for small cities and towns, whereas those aged to generally preferred suburban abodes. Ontarians said their search radius for new dwellings in expanded to kilometres of their current residence, from just kilometres in .
The internet has also become the place to search for a realtor. Almost per cent of those looking for information on an agent consulted social media or brokerfranchise websites. But those and older were much less likely to rely on digital platforms to find a realtor.
A survey by NAR revealed that per cent of U.S. millennials used the internet to find homebuying information. This is twice the rate for baby boomers. The digital-first generation is comfortable searching for information, communicating and negotiating with service providers online. For example, millennials obtained twice as many mortgage quotes as baby boomers.
Technology will enable more competition among service providers and better choices for consumers. Millennials are technology native, so they should use it to compete in the real estate markets where odds are stacked against them.
