It's not a good time to be buying a home.
They're priced out of urban markets and facing the prospect of renting forever because they're supposed to be in their prime homebuying years right now.
"Because of the soaring housing prices in urban areas, young people can't afford to purchase a property, which has become a global phenomenon," wrote a Chinese sociologist in an October 2020 paper called Children of the reform and opening-up: China's new generation.
The current state of the housing market in the world's two biggest economies reveals two different types of crisis, as shown by the fact that housing markets all over the world are seeing some version of this crisis. China's potential housing crisis will be felt across multiple generations within the same family, as the US housing crisis is shouldered primarily by one generation. The housing crisis looms closer to the horizon as China contends with the potential default of Evergrande, one of the country's largest property developers.
A generation bears the brunt of the housing crisis.
In the US, the housing market is showing that the financial situation of the young people is not good. They are facing their second housing crisis in 12 years.
According to the Apartment List's report, 47.9% of US millennials are now homeowners. It's still lagging behind other generations, with 42% of the young people being homeowners by the age of 30, compared to 48% of Gen Xers and 51% of baby boomers.
The lag is due to rising housing prices. The baby boomer generation paid 39% less for their first home in the US in 2008 than they did 40 years earlier.
They're getting screwed by the availability of homes, whether or not they can actually make a purchase. The perfect storm of a lumber shortage, an undersupply of homes, and the Pandemic created a perfect storm for potential buyers in the US. Hoffower was told by Fairweather that there is not enough homes in the US for young people to buy.
This has compounded into a generation that owns fewer homes, proportionally, than previous generations did at their age; paid more for those homes, if they were able to buy at all; and now are struggling to accumulate wealth because they haven't been able to build equity through homeownership.
A home.
The Star Tribune is owned by Bruce Bisping.
Everyone is implicated in China's housing crisis.
Homeownership rates in China are high.
A January research paper from the National Center for Biotechnology Information shows that more than 90 percent of households in China are homeowners. The US has a homeownership rate of 65%.
More than 20% of homeowners in China own more than one home.
The down payment on your first property in China is high, at 30-40%, according to Dr. Xin Sun, a senior lecturer in Chinese and East Asian Business at King's College London. The down payment on additional properties is more than 50%.
In her October 2020 paper, Li looked at how China's "new generation" grew up in an era of reform. Li's research showed how China's young people save, spend, and buy homes. She wrote that because housing prices have gone up in the past decade or two, most of the younger generation have had to turn to personal lending networks.
In China, most of the young generation have to get financial support from their parents to purchase a house or apartment so they can start a family.
Sun explained how the government policies have created this pattern of lending: "Government policies have created this pattern of lending by limiting the amount of money you can borrow from banks to buy properties, especially for the second and third homes." He said that people borrow money from family members to make their down payments.
Sun said that in a worst-case housing-market scenario in China, it's not a generation that would get wiped out.
Chinese families are not as separate as in the Western world, which means that for any generation to buy a property in China, it probably needs to collect money from all the family members. Younger generations who buy properties in big cities need savings from the banks of their parents and grandparents.
If there was an issue in the housing market, for example, a developer with $300 billion in debt, missed bond repayment deadlines, and signs of risk, what would be triggered wouldn't be a wave of bank defaults. There would be a wave of personal bankruptcies.
Real estate is a huge part of China's economy and household wealth. 29% of China's GDP is accounted for by the sector. According to Moody's estimates, 70% of Chinese household assets are tied to real estate.
A wealth divide is drawn along geographical lines.
Experts say that Evergrande is too big for the government to ignore, and that Beijing will intervene in a controlled implosion of the company. While Beijing is expected to prioritize homebuyers when it manages the bankruptcy, there will still be people who pay the price of Evergrande's mismanaged and outsized, $300 billion debt load.
The wealth lines of families in China are different.
Households that only own one home are thought to be at greater risk.
"People who own one home, because of high prices and low income, have some risk", said Li Gan, professor of economics at Texas A&M University and the director of the Survey and Research Center for China Household Finance at Chengdu's Southwestern University of Finance and Economics. "For many of them, their down payment is borrowed from friends, not from banks."
Sun said that people from lower- and middle-income families are exposed to higher risks because of the combination of lower income, lower family wealth, and higher prices they paid.
Along geographical divides, the wealth divide echoes. Less than 27% of married millennials from rural families own their property, Li wrote.
The intergenerational transmission of wealth inequality is getting worse, creating an ever-widening gap between the young people from urban families and those from rural families.
