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Why Canadian Youth are Beating American Peers to Homeownership

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A TD Economics report released this quarter revealed that while half of Canadian youth born between 1980 and 2000 had already achieved homeownership (and managing to do so earlier on in life than the previous generation), only 36% of Americans born during this same timeframe had accomplished the same feat.

The report takes a look at the factors influencing this discrepancy, and explores the reasons why homeownership has been more attainable for Canadian Millennials and young adults from age 25-34, than for their American counterparts in recent years.

America’s Great Recession and the collateral damage from the 2008/2009 financial crisis put American youngsters at a significant disadvantage in respect to lending conditions. Canada’s relatively stronger recovery from the crisis has allowed Canadian youth to benefit from better access to mortgage credit, stronger income gains, and better borrow terms (lower interest rates, better insurance terms), thereby allowing them to confidently enter homeownership at a younger age.

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Canadian youth are also less saddled with student debt. Tuition fees have increased at a much quicker rate in American institutions than in Canadian ones, making it near impossible for American youth to achieve a post-secondary education without consequentially amassing a large debt. American are also more likely to further their education past the undergraduate level, enrolling in grad school or earning professional degrees. “Pursuing higher education offered a better option than entering a weak employment market,” according to the report.

Lastly, while the US has seen a slow recovery from the recession, homeowners in Canada have experienced a100% increase in the national home price average. In a trickle-down effect that has surely benefited Canadian youth, “Some of this wealth and resulting financial wiggle room has been passed down to children,” speculated the TD economists in the report.

Overall, Canadians aged 25-34 currently have better prospects when it comes to real estate. However, analysts Caranci and Petramala expect the gap to be closing off in the near future. While America’s housing market still has room to grow,“Canada’s housing market expansion is now at a mature phase, with little scope for further gains in homeownership rates.”

 

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