According to a study released Nov. 9 from the Canadian Centre for Policy Alternatives (CCPA), young homeowners will be the most affected by a correction in Canada’s housing market.

The study was completed by David Macdonald, CCPA senior economist, to assess the impact of a housing market correction on the net worth of Canadian families. The study shows that a 20 per cent decline in real estate prices would cause 169,000 families under 40 to have more debts than assets.

“Declines in real estate prices would have a strongly disproportional impact on young homeowners,” said Macdonald in a press release. “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.”

The study showed that Canadian families are going into more debt to finance their homes. The average debt-to-income ratio among Canadians in their 30s has nearly doubled since 1999, reaching a new high of 4:1, which is the highest of any age group.

According to the study, if real estate prices were to fall by 20 per cent, it would cause families in their 30s to see an average dollar loss of $60,000, or a loss of 39 per cent of their net worth. One in 10 home-owning families under 40 would have more debts than assets (or one in seven, if prices were to decline by 30 per cent). Meanwhile, middle-aged families (those in their 40s, 50s and 60s) would find their net worth decreasing by an average of $70,000 to $80,000, resulting in a 23 per cent drop in net worth or less, due to their lower debt levels and broader asset diversification.

“As a rule of thumb, young families lose 20 per cent of their net worth for every 10 per cent decline in real estate values,” said 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 followed up these numbers with an evaluation of programs that were used in the U.S. following their real estate crisis and makes recommendations for programs that may be useful to Canadians in the event of a real estate correction.