Home Ownership from the Perspective of a Chinese Millennial
I am 26 years old. As a typical millennial who started her career in New York City, most of my income, which is handsome by some but hardly Manhattan’s standards, went towards — in addition to rent and food — a whole variety of millennial-ish activities: indulging in avocado toast brunches, riding SoulCycle, or buying the latest pairs of wool sneakers from AllBirds.
Until, earlier this year, I made a decision that is almost un-millennial: I became a home owner.
I want to hereby share my personal experience becoming a first-time home owner. You may be like how I was a year ago: in your mid-to-late 20s, pondering if you would like to buy instead of rent. You may have accumulated some savings of your own, and maybe your generous parents are also willing to sponsor a portion of the down payment, but you might be similarly worried about home ownership impacting your “yuppie” lifestyle. And if this is you, read on.
Just like many of my American peers, I was grossly under-prepared for home ownership and had an extensive list of reasons against it. I didn’t want to settle down — there are still plenty of people to meet and date, and plenty of different career options to explore; I didn’t think I could afford to buy, which seemed a lot; I wanted to keep my Manhattan lifestyle, and didn’t want to be viewed differently from all my peers; and so on and so forth.
Most of these arguments are still true: I still make no plans beyond the immediate next two years I am still far from starting a family of any sort; New York home prices are still quite a financial burden; and my love of brunches and SoulCycle has not subdued a bit. However, I find myself a follower of the home-buying craze among the Chinese in the States. After a year of deliberation, I grew to appreciate why my Chinese mom was nagging me about apartment hunting in the States; why my Chinese peers were snagging condos and single-family houses in New York, Boston, and the Bay Area with varying degrees of parental support; and why “fang zi”, or owning a home, is such a fascination for the Chinese.
The influence from my Chinese circle of family and friends was what ultimately triggered me to think differently about home ownership, and why I now believe that we should all start considering buying a first home earlier.
Before I explain why I changed my perspective of home ownership, it is necessary for me to explain the Chinese fascination of “fang zi” (literally translated as “a house”).
Many of you are aware of the flooding of the wealthy Chinese in the Manhattan real estate market. They poured millions upon millions into the luxury condos in Central Park South, Hudson Yards, Downtown Brooklyn. They have been labeled as the archnemesis to affordable housing, the barricade against middle-income home ownership, and the contributors behind a brewing housing crisis.
I didn’t decide to buy because I wanted to jump on the bandwagon with the super-riches. I don’t have the cash they have. I am merely a daughter of a middle-class family who had to carefully spreadsheet the amount of mortgage I could afford. I decided to buy because, as I matured, I came to understand the underlying motivation why Chinese, or rather Chinese families, put more than 70% of their personal wealth in these concrete cells.
To Chinese, “fang zi” is the physical, emotional and socio-economic fabric for a family. It is a prerequisite for marriage and parenting, and the de-facto investment vehicle for families (note: families, rather than individuals) regardless of their income levels.
The media often portray the Chinese buyers as greedy investors who have made it difficult for millennial, middle-income, and first-time buyers to own a home. However, what a lot of people do not realize is that a good portion of the cash behind these Chinese purchases are quite selfless in its own regard — parents buying for their sons and daughters who are starting their careers in the coastal cities; young couples buying suburban homes so that their parents, who have recently retired from a frugal, modest and hard-working life, could enjoy their remaining years accompanied by their children and grandchildren; aspiring parents spending hours and even days searching for the best school districts they could afford so that their children could get a head start.
In my humble opinion, it is indeed the influence and, in some cases, the financial support from our parents’ generations that have triggered the trend whereby Chinese millennials, more than others, remain strong buyers; whereby the Chinese baby boomers are helping their millennial children buying homes, not keeping them away from affordable first-time home ownership.
On the issue of home ownership, I thereby went 180 degrees from a typical 20-something Manhattan renter to a home-owner in Astoria, Queens. My Chinese family and friends triggered me to make the first call to a loan officer, schedule the first open house, and make my first offer on a condo.
Now, after having gone through the process, I realized that my rationales for not buying a year ago hardly applied to me anymore. Home ownership does not necessarily mean settling down; while the all-in price tag is a very large number, it is not as large a financial barrier as most would think, especially compared to hefty urban rental costs; and you may even end up leading a fuller life.
1. Home ownership is an investment decision. Thinking about buying homes early is training your investment mindset early. Home ownership is probably the most important financial decision we would ever make in a lifetime. However, for most of us, we only get to make that decision once, or maybe twice, and usually at a time when the investment decision is compounded by a whole variety of compromises that have more to do with the location of a very specific employer, or school, or relative. Balancing where one would live and where a property would appreciate or bring other intangible values (e.g.: school district) is not an easy task. I am lucky as my Chinese background put me pre-exposed to home ownership as an investment concept. My family and friends planted the thought in me, so I started browsing on Streeteasy, reading Curbed NY, visiting neighborhoods — all of which were part of an early Home Ownership 101 program that prepared me when the timing was right.
2. Home ownership does not equate settling down. In most urban areas, the market as liquid as your decision to move. Owning a home equated to settling down back when mobility was rare. However, in this day and age, we move, we change jobs, we switch industries… Some people view increasing mobility as an argument for renting as opposed to buying. However, I start to see it differently: As we become more mobile, the housing market is turning more liquid as well. A typical home today goes into contract 49 days after being listed — that is less than two months! It could take longer than two months for most of us to decide whether to change our jobs, our partners, or cities.
3. It is naïve to buy into the “renting is the new shared economy” or “renting is the new normal among millennials” argument. Renting, simply put, is throwing away money that could have gone towards appreciative investments. If you look at any of the neighborhoods that top the list of millennials’ “best places to live”, one phenomenon is familiar. Millennials in these neighborhoods are paying exorbitantly high rent in exchange for the lifestyle they desire, while baby-boomers, foreign buyers, or real estate corporations are bringing in massive amount of rental income. We love the elitism of luxury rentals, and want to join the co-living cults — “luxury rentals” or “co-living spaces” are indeed attractive lifestyle promises, but they are also marketing narratives that keep us renting and help developers make returns. In my opinion, renting is inherently different from the “shared economy”, “leasing more than buying”, or “as-a-Service” new normal. A car, an industrial equipment, or a hardware server depreciates the more you use it, so the shared, learning, or as-a-Service models decrease the total lifecycle cost. However, a land property appreciates. If monthly rent and mortgage are equal amounts, their long-term values differ tremendously: former goes into the ether while the latter goes towards an appreciable investment.
4. Make down payment for a first home a higher priority when you graduate. It is not hard to argue why, if you had the same amount of money, it would be wiser to use that to pay mortgage than to pay rent. However, it takes much more discipline to say no to all the “instant pleasure” spending in order to save for a down payment. It takes long-term planning, and maturity. If I somehow convinced you to prepare yourself for buying a home, then it wouldn’t be too late to start saving for a down payment. Luckily for us, most “instant pleasure” spending is quite elastic.
5. Be wise about which neighborhood you would like to buy a home in. You may not be able to buy where you used to rent — but downgrading to a less-costly neighborhood does not equate to downgrading your lifestyle. Although home ownership does not equate settling down, it could mean a change of neighborhood. A neighborhood with the most ideal rental inventory is not always one with the most ideal sales inventory. Just like every time we change neighborhood, we ought to do some homework, especially how the new neighborhood synchronizes your work, social and relationship circles.
Home ownership is ultimately a personal decision, and everyone has different circumstances and preferences. The trigger for me to start considering buying is my Chinese background, but yours could be completely different: a neighborhood you fall in love with, an apartment you see yourself in, the bothersome annual rent increase, or having a moment of epiphany after reading yet another article about the relationship between home ownership and avocados.