Real estate downturn could be devastating for young homeowners: study

November 9, 2015

OTTAWA—Young homeowners would be hardest hit by a correction in Canada’s housing market, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).

The study, by CCPA Senior Economist David Macdonald, assesses the impact of a housing market correction on the net worth of Canadian families and finds a 20% decline in real estate prices would leave 169,000 families under 40 underwater, with more debts than assets.

“Declines in real estate prices would have a strongly disproportional impact on young homeowners,” says Macdonald. “If, or more likely when, real estate prices fall, families in their 20s and 30s can expect to lose a substantial portion of their net worth and could find themselves owing more than their house and other assets are worth.”

Canadian families are taking on disconcerting levels of debt to finance their real estate dreams. The average debt-to-income ratio of thirtysomethings has almost doubled since 1999, hitting a new high of 4:1, the highest of any age group.

According to the study, a 20% decline in real estate prices would result in:

  • Families in their 30s seeing an average dollar loss of $60,000, or a loss of 39% of their net worth. 
  • 169,000—or 1 in 10—home-owning families under 40 having negative net worth (debts greater than assets).  A 30% decline in real estate prices would leave 294,000 young families underwater, equivalent to 1 in 7 of those families.
  • Middle-aged families (in their 40s, 50s, and 60s) would see their net worth fall, on average, by $70,000-$80,000, resulting in a decline in net worth of 23% or less given their lower debt levels and broader asset diversification.

“As a rule of thumb, young families lose 20% of their net worth for every 10% decline in real estate values,” says Macdonald. “In cities with higher prices, like Toronto, Vancouver and Calgary, young families would likely see declines in net worth dramatically worse than the national average due to higher leverage.”

The study concludes with an evaluation of programs that were used in the U.S. after their real estate crisis and makes recommendations for programs that could be useful in Canada in the event of a real estate correction here.


The Young and the Leveraged: Assessing the Impact of a Housing Market Correction on Canada’s Homeowners is available on the CCPA website:

For more information contact Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.