Millennials are using technology to compete in tight housing markets

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Millicent Wong
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from RBC Mortgages

  1. property

Millennials are using the internet to compete in real estate markets where the odds are against them

Real estate listings displayed in a Toronto realtor window. Real estate listings displayed in a Toronto realtor window. Photo by Brett Gundlock/Bloomberg

The rapid escalation in house prices has disadvantaged millennials, who started their working lives on wages that fell short of housing affordability thresholds, but they are increasingly turning to digital solutions to compete in tight markets.

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First-time home buyers, the majority of those who buy a home in Canada, tend to be younger households making the transition from renting or living with their parents. In the United States, Millennials made up the largest proportion of home buyers at 47 percent, according to the National Association of Realtors (NAR).

A recent op-ed noted that “Millennials have aged at the worst possible time in the housing market.” Soaring home prices and the persistent imbalance between supply and demand have frustrated millennials, who typically lose bidding wars to older, wealthier buyers.

But all is not lost for millennials. Historically low interest rates imply that their monthly mortgage costs will be relatively affordable despite higher purchase prices. Unlike older cohorts, much of their mortgage payments are not eaten up by interest payments.

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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 benefited millennials as they are more likely to adopt digital solutions.

An Ipsos survey last year for the Ontario Real Estate Association showed that 45 percent of Ontario residents said their first step in buying a home was searching for homes online, and six percent began by attending online days of the open door. Only 14 percent said they first contacted a real estate agent.

The most consulted information source was Realtor.ca, a web portal affiliated with the Canadian Real Estate Association, which saw a whopping 516 million visits from 111 million unique visitors in 2021. However, younger shoppers are more likely than others to consult kijiji.ca and zallow.ca.

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Other real estate portals have recently emerged in Canada. For example, Zolo is a Canadian digital real estate platform that has seen 165 million visits to its websites and more than 887 million page views. Zolo has 300,000 daily users and around 40 percent of these visitors are between the ages of 18 and 34, while another 25 percent are between the ages of 35 and 44.

Female homebuyers are also increasingly turning to digital solutions. Zolo reported that women outnumber men in daily visits to her portal, accounting for 53 percent of visits.

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The pandemic has changed the location priorities of homebuyers, including millennials. Buyers are generally looking for homes with more living space and backyards, while millennials, aware of the increasing opportunity to work from home, are looking for homes in areas with fast and reliable internet. Nearly one in four Ontario millennials expressed a preference for homes in places with better internet service, compared to just nine percent of those over 55.

Additionally, most older shoppers said they prefer smaller cities and towns, while 18-34 year olds generally preferred suburban housing. Ontarians said their search radius for new homes in 2021 has expanded from just 36 kilometers in 2020 to 165 kilometers around their current residence.

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The internet has also become the place to look for a broker. Almost 88 percent of those seeking information about a broker consulted social media or broker/franchise websites. But those over 55 were much less likely to rely on digital platforms when looking for an agent.

A 2017 NAR survey found that 99 percent of US millennials used the internet to find home-buying information. That’s twice as much as the baby boomers. The digital-first generation conveniently searches for information online, communicates and negotiates with service providers. For example, millennials received twice as many mortgage offers as baby boomers.

Technology will allow more competition between service providers and better choices for consumers. Millennials are technology natives, so they should use them to compete in real estate markets where the odds are against them.

Murtaza Haider is Professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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