In the midst of the volatile housing market, one that has both taken down mortgage stalwarts and ripped roofs above so many Americans’ heads, it seems that Asian Americans have found themselves relatively unscathed, as Rex Feng reports in this issue.
Asian American homebuyers have long been plum consumers in the real estate market, with the highest median household income and a propensity to buy higher-priced homes than other ethnic demographics. Indeed, Asian American home ownership jumped from from 53 percent to 60 percent between 2000 and 2005, according to the Asian Real Estate Association of America. This growth rate outpaced that of every other ethnic group in the country over the same time period and would appear to signal a healthy appetite for home buying at precisely the wrong time.
Yet Asian American homebuyers remained prudent: Only 17 percent of the mortgage loans given to Asian Americans in 2006 were subprime, compared to 30 percent for whites, according to a study conducted earlier this year by AREAA. What’s more, they hit the brakes when they sensed the road getting bumpy: Home purchases among Asian Americans dropped a stunning 21.5 percent in a single year between 2006 and 2007 — right before the housing market burst.
Part of this premonition is cultural: We are conservative borrowers and prefer not to gamble when it comes to our finances. But it also seems that we were simply following the same home-buying habits we have always had, shying away from low introductory rates in favor of large down payments and preferring fixed-rate mortgages to adjustable-rate ones.
In general, the Asian community works hard to save money, typically only buying things we can afford. When we do buy homes, we tend to make a large down payment and strive to pay off our loans quickly. It is ingrained in our cultural values to be cautious with our purchases.
Asian Americans should take from this example the lesson of listening closely to our instincts, regardless of what those around us are doing, and rejecting the American get-rich-quick ethos. The Asian American way of doing things may not be right all the time, but it has helped us withstand at least this crisis.
