Young people in K-W need to save for an average of 20 years to afford a down payment: report

Amanda Luloff lives in a two-bedroom apartment in Cambridge, but has been looking for a house to call home for years.

“Today’s housing market is very hard,” the single parent says. “I’m 43-years-old, I’m a single mom. I feel like I’ll never be able to own a home.”

While it’s not difficult to find people in Luloff’s situation in Waterloo region and across the country, a new report shows just how drastically housing prices have outpaced many people’s budgets.

Comparing average earnings to average home prices, the charitable think tank Generation Squeeze determined it would take a typical young person in Kitchener-Waterloo 20 years of full-time work to save a 20 percent down payment on an average-priced home.

In 1976, a typical 25 to 34 year old earner could save a 20 per cent down payment in five years.

“Ontario’s lost control of home prices more over a two year period than any other province at any other time in the last half century,” says Paul Kershaw, the founder and lead researcher of Generation Squeeze.

The group’s "Straddling The Gap" report shows house prices need to drop by more than $500,000 for a typical young person to afford an average home in Ontario. In Kitchener-Waterloo, prices need to drop by more than $445,000.

A graph of Kitchener-Waterloo home prices relative to 25 to 34 year olds earnings. (Generation Squeeze)

“Too often we tend to sort of individualize the harm that’s happening to younger Canadians in our housing market as opposed to talking about how our housing system is quite dysfunctional,” Kershaw says.

After analyzing data from the Canadian Real Estate Association and comparing it to Statistics Canada data on annual income, the report concludes that home prices should stall for years ahead or continue to fall moderately.

HOUSING MARKET COOLING

Alexis Soha with the Noble Realty Group in Kitchener says she has already seen a downward pressure in the cost of homes.

“I have seen a decrease in home prices, for sure,” Soha says. “Part of that is the rising interest rates that are factoring in. It’s costing more to own a house, especially now with inflation and the day-to-day cost of living. All of this is coming into play when it comes to impacting prices in the market.”

While Luloff saves every month for a home, she says it’s easier said than done and worries for her young daughter’s future when she too will need a home.

“What is it going to look like in 16 years when she wants to buy, when she wants to move? If the economy is so up right now, what is it going to look like for my four-year-old,” she says.

In its latest monthly release, the Waterloo Region Association of Realtors reports the housing market saw a continued cool down in November with the number of home sold year-over-year down by nearly 44 per cent and the average sale price dropping more than 10 per cent.

The stall is something Generation Squeeze argues needs to continue for many years ahead to make housing more attainable for would-be buyers.