Kids these days…

Question for the crowd here…

Clearly this woman has a healthy income, and she can no doubt pay the rent. But I gotta imagine, given her line of work, she’s closer to the qualification threshold ($200K, say) rather than rolling in it ($500K, say).

I’ve noticed youngins these day seem to be spending more than me or my peers did at that age (28 in this case). At this sorta income, I was probably spending somewhere less than half of what she’s spending on rent. And I imagine, my long-term income prospects were probably better.

Is it just me, or are the kids spending more / saving less than their predecessors used to? I go out, see all the youngins spending away at expensive places I frequent, and think they surely all can’t be bankers, trust funders, etc. I don’t really remember this scene back in the day, but then again maybe I was hanging out with the “wrong” crowd.

Do other people sense a generational shift, or is it just me?

Note: I am not making a judgement on peoples’ preferences, I’m just interested in understanding whether there has been a shift.

We don't have a 20-year-old, but my sense from watching my friends' kids is that "going out" is much more expensive than it used to be. And also, the company-sponsored/industry-sponsored hangouts seem to have dried up. (It wouldn't have been that unusual for us to figure out a way to get drinks, and at least snacks if not a meal, on someone else's dime on a Friday night.)

So I don't think kids are going out *more* than we used to, but going out *the same amount* is impacting their ability to save.

Just read the article as somehow NYT let me read it without subscription.

$4500 in rent!!! That is nuts and I don't think typical. I would have been sharing a 1 bedroom by splitting the living room into two. In fact, many investment banking analysts do the same now and I see apartment shares in walk-ups in queens and BK at $1000-1500 per month.

Separately, I think kids are used to spending more since their college days starting with fancier dorms (we had a thread on that). I see young kids ordering $7 with tip lattes rather than making coffee at home. I see them do delivery from Chipotle which adds 50% to the cost instead of going to Chipotle yourself.
How are they funding post college expenses? Beats me. I suspect it is a combination of generational transfer of money, foreign students (I see Chinese college kids eating at the same mid-end restaurants - $50 per person before drinks - I eat), a lack of savings and entry level jobs in tech/start-ups paying more. Perhaps it is more of a reflection of my living in a wealthier neighborhood rather than seeing young kids having cheap pizza slice on the go in Bushwick.

>> Just read the article as somehow NYT let me read it without subscription.

That’s because I gifted it. NYT lets subscribers gifts 10 articles per month, and I burned one for this motley crew. Remember you were asking what you’d win for guessing the right price on the townhouse sale? This was it.

Ha. Thank you.

>> So I don't think kids are going out *more* than we used to, but going out *the same amount* is impacting their ability to save.

That’s true, but so much of it seems self-inflicted.

My wife was commenting about how it’s become so hard to go out to dinner without the tab going over $100 per person. That’s certainly true of so many places we frequent nowadays — not fancy places, but nicer casual places with good cooking — but it wasn’t true when we lived near the East Village. There, we’d regularly find our tab at $50-$75 per person for nicer casual places. Not to mention sub-$40 at the Ukrainian places, my favorite of which was Little Poland.

The disconnect is that the East Village restaurants aren’t packed. They’re busy, but the youngins are packing the more expensive places with much more gusto.

As 300 says, they want the nicer/cooler/etc. stuff, and they are willing to drop their money on it all to have it now.

>> $4500 in rent!!! That is nuts and I don't think typical. I would have been sharing a 1 bedroom by splitting the living room into two. In fact, many investment banking analysts do the same now and I see apartment shares in walk-ups in queens and BK at $1000-1500 per month.

I would hope so, that entry-level IB-ers haven’t lost their sense of the time value of money even in this day & age.

Around 10 year back, I had my analyst from a relatively well-off family (parents could easily afford to pay her credit card bills for context), sharing an apartment with 3 other of her friends paying <$2k each for their own bedrooms and large shared living room in Union square area. That is probably closer to $3k each now.

That is why I think NYT story is really an exception and woman featured probably has some other sources of income/funds.

Share houses 4br+ under 5k in Bushwick.

https://streeteasy.com/for-rent/bushwick/price:-5000%7Cbeds%3E=4

Highend!! I am sure illegal bedrooms which is why they rarely show floor plan.

https://streeteasy.com/building/18-starr-street-brooklyn/4f?from_map=1

I'm with @nada the this is highly self-inflicted
I remember my decade+ younger cousin moving to NYC pre-covid and he was commuting via various forms of rideshare/ridehail apps .. within downtown Manhattan. Yeah it was cheap due to peak ZIRP VC subsidy, but it wasn't a $2 subway fare either. Noticed a ton of zoomers in my BK condo doing likewise.

I use to joke I was too poor to wear Prada like the zoomer trustafarians in my building (but owned two homes instead). I think coming up in the ZIRP era and IG induced FOMO really did something to this cohort.

My wife & I (in finance) lived in a studio before marrying, and then in a pretty dumpy but well-located 1 BR rental until we bought. Seeing kids on less high growth career paths deciding they need to blow $4500/rent to live in a newly renovated, 1 bedroom, alone, in prime areas.. is something. NYC rent is expensive for sure, but I also know someone worth about 8-figures that only spends 1.5x this on rent. He is not a tattoo artist.

People are free to spend their money however they want, I just don't want to hear how whatever generation has had the worst economy ever and begging for more subsidy while blowing cash like this.

I could never imagine paying $4400/month in rent, even if I could easily afford it, I would have to assume there is a lot of other decent stuff out there for less that is still nice and not a dump. It seems the younger generation is more interested in “experiences” like traveling and eating out frequently at the trendiest restaurants rather than living frugally and saving for a down payment on a home. And I don’t think this trend is new or recent. And that’s perfectly fine, but like others have commented, I get irritated when this same younger generation complains how out of reach home ownership is for them and begs for help, like canceling their student debt. Maybe not ordering a triple venti latte at Starbucks every day or paying $4400/month in rent would help, but I totally get it that for many home ownership is not a priority, it’s just hard to have it both ways unless you are a trust fund baby or win the lottery

I think, 911, that home ownership may not be a priority because it seems *so* out of reach. I'm not a Starbucks girl, but what's a triple venti latte cost? Seven bucks? Ten? Skip one a day and you'll have an extra two or three thousand in a year -- that's not enough to move the needle on prime Manhattan/Brooklyn/Queens homeownership. So why not buy the coffee?

And as far as cancelling student debt, I believe there's an argument that you get overall economic growth out of the increased consumer spending that results.

I think spending on "Experiences" is driven in large part by social media as people can now share where they were by touch of a button with all their friends. It would have been strange 25 years back to send an email showing off where you went. In addition to spending on "show-off" items, social media / videos sharing etc has resulted in numerous mental health issues for young people. Earlier you just didn't know what other 10,000s of people were doing and your competition was limited to probably 50 kids you had any interaction with. Now you do. Savings are typically not shown off on social media.

On $7 coffee - it is a mindset and symptom. Alongwith $7 latte comes $4 croissant and $30 Chipotle delivery rather than making a simple meal for yourself at $5 (1 lb of non organic chicken is still $4-5 and will last you 2 meals) or getting two slices of pizza for $7. Toast and Nespresson at home is $1.5. There used to be this thing called Digiorno. All adds up.

@Ali - While I agree on the general sentiment that in NYC, these small differences don't move the need on a down payment..

I think the argument is that at some degree, recognizing that there are phases of your life where you sacrifice so you can live more/better later.

In your 20s it might be to build up a safety cushion, and start your retirement accounts, by late 20s/early 30s a home/wedding and more substantial retirement savings, by 40s for your own kids college, and maxing out any pre-tax retirement benefits etc.

And hey, $3k/year for someone on like a $90k income is.. 5% of their post-tax income... not nothing! And these things don't happen in isolation. The same 23 year old blowing 5% of their post-tax on lattes is probably overspending $1k/mo on rent, $5k/year travel, etc.

One theory I have is that a lot of younger people kind of intentionally or not sleepwalk themselves into negative cash flowing NYC lifestyles such that they only last 3-5 years here. Few of my friends that made it past 5 years in NYC were the ones living fashionably at 23. Seems like the zoomers are going to speed run the same pattern

28 year olds are adults.

>> Few of my friends that made it past 5 years in NYC were the ones living fashionably at 23.

Did the ones who were living fashionably eventually find fiscal discipline, whether the ones who left NYC or the ones who stayed?

>> And hey, $3k/year for someone on like a $90k income is.. 5% of their post-tax income... not nothing! And these things don't happen in isolation. The same 23 year old blowing 5% of their post-tax on lattes is probably overspending $1k/mo on rent, $5k/year travel, etc.

The most detrimental part of this sort of mentality, IMO, is that it never stops. If you’re spending all your $90k income at 23, by the time you’re 33 and earning $180k, you’ll probably figure out a way to spend all that too. And by the time you’re 43 and earning…

This is a story old as time, every generation has their spenders and their savers. It just feels like the latest ones who have come into the workforce are skewed towards spending.

>> Skip one a day and you'll have an extra two or three thousand in a year -- that's not enough to move the needle on prime Manhattan/Brooklyn/Queens homeownership. So why not buy the coffee?

I dunno, $3k per year on coffee. Lemme plug that into my stock-o-meter to see what that became. Past 10 years => $8.4k. Past 20 years => $17.6k. Past 30 years => $54.5k. Past 40 years => $208k. Past 50 years => $818k. Past performance is not indicative of future performance, etc., so maybe that won’t be the course for $3k today. But it’s more about setting yourself up to take advantage of future opportunities that may open up, wherever they may be.

This is a story old as time, again. The generational shift is interesting.

@front_porch - a very good point, one often missed by a lot of 'pick-yourself-up-by-your-bootstraps' (a logical impossibility, it was once pointed out to me) type political and social commentators. For many in the economy, a minor medical emergency would wipe out years of savings overnight. And this is true in the wider world, not just NYC.

...At the same time, old-fashioned virtues like frugality, prudence, modesty are out of fashion. Too boring. Self-esteem is conflated with self-indulgence.

I'm so glad I grew up without social media - too many incentives to aspirational spending.

>> So why not buy the coffee?

My answer to this is often “Well, because it’s just become silly”. I’ve got lots of money to burn, but when the price of something becomes silly, I personally don’t care to participate. This literally happened with coffee. A cappuccino at the local spot in our building used to run $3-4 pre-pandemic with a loyalty card, and it was well-made. Served in ceramic if you wanted.

Nowadays, the going price seems to be $7, and the going barista is hit-or-miss in their capabilities to tune the espresso extraction and/or froth & pour the milk. Half the “quality” shops only carry paper cups. I can make a cappuccino at home for $1.50, using a Nespresso machine & frother, with better consistency than the average barista at a “quality” shop. Served in ceramic, no less.

So nowadays, I skip the coffee places as a regular thing. I went from ~400 visits per year to ~20, usually when I’m traveling.

On the dumbing down of baristas… A couple of months ago, we were in an LA coffee spot. Well-made, served in ceramic, but probably took 15 mins from placing the order to being served. The most amusing part was my wife asking for skim milk. They said they didn’t have that. So my wife asked whether they had low-fat. Answer: “Nope, but we have non-fat”.

You’re a goddamn barista. Your entire job revolves around mixing different amounts of coffee with different amounts & kinds of milk. Somewhere along the way, spend 15 minutes reading about the different types of milk.

>> I think, 911, that home ownership may not be a priority because it seems *so* out of reach.

This, I think, will be the great irony. So long as the free-spending days continue, rates will stay elevated and homeownership for most will involve borrowing at 7.25% from a lender who finances by paying the savers 5.25%.

For a good 15 years, savers got the shaft. Save-to-invest made out like a bandit, but pure savers — those unable or unwilling to invest — got pretty screwed. Nowadays, the outlook for pure savers seems rather nice.

I think as others have stated it is also a case of lifestyle expectations inflation from childhood through college. Kids are raised in nicer suburban homes than they were 30 years ago, and their college dorms are like mid tier hotels.

Funny story, my intern a few years back was moving back after being hired full-time. Had gone to college in the city, living in above-average housing since the dorms are all nicer than they should be for the cost. He was preparing to move in as a roommate with his buddy from college. That buddy was having a new dev condo purchased by mommy. They were going to split a $2M-ish condo on $100K-ish income. That fell thru and nonetheless they managed to find a sublet studio in a doorman building walking distance from work.

If this is where your expectations start, you are never going to be satisfied owning a "starter apartment" will likely pay premium rent, undersave and then complain that the luxury condo you want to buy is forever out of reach. Like.. yeah.

This young lady is pretty unique. Essentially having her country stolen from her she became a nomad and is here for a finite time. She's currently not thinking long term because of her previous trauma. She's pretty with an in demand skill. I imagine she will eventually go back to Europe. She's living an interesting life, different from the typical young striver we're used to seeing around town.

This is probably a big part of it. Real incomes have grown.

https://fred.stlouisfed.org/series/A939RX0Q048SBEA

https://fred.stlouisfed.org/series/MEPAINUSA672N

And that govt debt has grown. So overall far more money being spent in the economy.

+1 on @stache's comment. I agree that the young woman featured in the article does not sound typical, but rather quite extraordinary. I suspect she will not have a problem taking care of herself in the present or down the road, absent unforeseen health issues.

>> This young lady is pretty unique.

I agree. Instead of scrolling through Instagram, she was watching TV:

“I would see people on TV, living their best lives, and I would think, I want that too. I am motivated by my own desires. Not having something I want hurts.”

Respect, that’s old school.

300>> This is probably a big part of it. Real incomes have grown.

That’s a fine point. Your charts show 18% real growth in median income and 28% real growth in GDP per capita since 2004. Capacity for real consumption from this cohort seems higher than that, when compared to prior cohorts.

I should also say that it doesn’t seem isolated to this cohort. Post-pandemic, I personally sense a shift in peoples’ spending broadly.

I'm always SMFH at these kids who can't come up with their $800 share of the rent but always have the latest $1400 and phone, $800 sneakers, regularly spend $3

I'm always SMFH at these kids who can't come up with their $800 share of the rent but always have the latest $1400 and phone, $800 sneakers, regularly spend $200 on dinner, $700 on concert tickets, etc

@nada - whatever her motivation, she is going to make it work. I have a former friend whom I have alluded to on this board before who was just like that and now has hundreds of millions. She lived well above her means until she struck gold, and I suspect that trend continues. I would be that nobody could blow through a hundred million as quickly as this individual could, but I also believe that her motivation for shiny things will always channel her considerable talent towards getting those shiny things such that she will never be wanting. She is extraordinary. While I do not share her values, I have to give her her due. As for the woman featured in the article, I likewise found her extraordinary; I have no opinion on her overall values because I know nothing of her beyond what is in the article.

I think the rest is social media influence.

"Capacity for real consumption from this cohort seems higher than that, when compared to prior cohorts."

MCR>> whatever her motivation, she is going to make it work. I have a former friend whom I have alluded to on this board before who was just like that and now has hundreds of millions

I think she’ll make it work too, and how she does so is up to her. My interest here is not to judge her choices, or the choices of the generation. That is up to them. I’m mainly interested in the economic consequences.

On the case of your friend, that’s good for her. But I think life has shown me countless examples that went the other way. Plenty of extraordinarily talented spenders who don’t make it big even though they all make it work. This usually comes with an epiphany that they don’t really need all that spending, after all, to make it work. Unsurprisingly, the timing of the epiphany often coincides with the drying up of resources.

There are only 10K centimillionaires in the US out 350M people. Most people, whether spender or saver, extraordinarily talented or not, won’t make it to that rarified air. My money would be against an extraordinary 28 year old war refugee tattoo artist making it there, not because I don’t believe in her, but simply because of the odds. My money would be on her “making it work”, though. I am confident she’ll have a good life whatever the path.

Fascinating story of an extraordinary woman blowing through lots of money and facing bankruptcy ($100m owed) at age 65:

https://www.nytimes.com/2024/02/21/style/louise-blouin-hamptons-bankruptcy-art-society.html?unlocked_article_code=1.Yk0.h_z2.Fh35Ptd9OTW1&smid=nytcore-ios-share&referringSource=articleShare

But I find this one more extraordinary. She found $1B her husband had hidden from her all her life, and then blew the whole $1B in style:

https://www.nytimes.com/2024/02/26/nyregion/albert-einstein-college-medicine-bronx-donation.html?unlocked_article_code=1.Yk0.2m4N.7Fw5o412pQ-k&smid=nytcore-ios-share&referringSource=articleShare

Money came from a $33k investment made 56 years ago.

300>> I think the rest is social media influence.

I could see that, but I’m so disconnected from that world that I can’t make such an assessment personally. Just hearsay, and I’m hearing that said a lot.

@nada: Terrific story about Ms. Gottesman's gift, and great news for the school (I know people who went there). Also a great juxtaposition w/ the Louise Blouin story. Both worth reading for a lot of reasons.

I had not appreciated the juxtaposition until you mentioned it: I had read the articles days apart. But after your comment, I re-read. Quite the contrast indeed.

People often talk about youngins today, and how they’re into social media related preening and self-indulgence, and how it’s a new phenomenon. I’ve long held that such behavior has always been there, only the medium has changed. Posers will be posers.

“She made her New York society debut in 1978, representing Canada at the International Debutante Ball held at the Waldorf Astoria.”

Nada,

Posers will be posers indeed but now it so easy to broadcast your pictures and videos yourself any moment with minimal effort or tech expertise where as in the past you needed a newpaper to publish something about you after a delay and they could only publish about limited number of
generally very wealthy people on society pages.

Now millions can boast about their social life and experiences at the same time. An example is that you can be in a restaurant and click a button which pumps out "xxx is here" to your facebook friends. What a sad show off!

People like me don't care but when you are young, trying to be cool and find broader social acceptance, it is hard to resist the social media pressure for many contributing to some of the spending you mention. For me, I just like looking at pictures of real estate on-line which is a big plus of technology and I accepted long time back that I will never be cool for social media or otherwise.

https://www.forbes.com/advisor/credit-cards/how-social-media-can-destroy-financial-health-study/

https://www.cnbc.com/2023/12/04/tiktok-is-driving-spending-for-women-in-their-20s.html

My 36-year-old daughter has always been excellent with money, and let's just say very frugal. She's fully involved in social media socially and for her business. But it appears to have zero effect on her spending habits.

My 11-year-old daughter, on the other hand, although she has no social media accounts, other than some weekend access to YouTube still manages to be influenced by social media regarding spending habits. This leaks in through some of the people she watches on YouTube, young women who have 10 million plus viewers playing roblox. And friends that have full access to the internet . I agreed to take her into Sephora, She wanted some face cream or something. First, I was shocked the place was absolutely packed with tweens all pining for the same, very expensive products (drunk, elephant, etc). The little serum that she wanted was about 90 bucks! I had to have a quick discussion with her, and suddenly became the bad guy : ) a 50 something saleswoman overheard our discussion, came over me sort of in disgust. She said this is all driven by social media, they all want the same brands, the same products, that aren't even appropriate for their young skin. And somehow all these tweens had plenty of money to buy these very expensive products. It was really pretty depressing.... Of course I took her on this little excursion without my wife's knowledge, She filled me in when I got home.

She goes to a small private school, so everybody sort of knows each other. And it's pretty sad how they're all such brand queens. My wife has had to spend a lot of time explaining to her what's appropriate, and what's best for her skin at her age. She gets it, but it's still hard when you have other kids whose parents put no restrictions on what they watch or what they buy. So of course there's going to be some jealousy etc. It was much easier being a parent in the '80s and '90s!

Thanks for the articles, 300. Thanks for the anecdotes, Keith. Although I blame you for taking my morning down a most entertaining rabbit hole about tweens raiding & trashing Sephoras after being mass-influenced on some product. The zombie apocalypse has finally arrived! Most entertaining quote from that rabbit hole:

https://www.reddit.com/r/Ulta/comments/12bkfo5/tiktok_is_the_bane_of_my_existence_at_this_job/

souperdouperstripper
OP
•
1y ago
I think TT is making kids grow up too fast in that regard. Like, why is a ten year old with threaded eyebrows and a full set of acrylics looking for shape tape? Go play hopscotch.

Tough time to be a parent indeed. Good time to be a capitalist, though. Social media finally accomplished what 12 years of ZIRP could not. The hordes control the land, the Fed just scrambles after them like an unsuspecting parent dragged into Sephora by their tween.

There are basically two sides to this battle. The parents that are fighting to keep their kids off tick-tock etc. And the parents that just don't care, as it 'babysits' their children for hours on end. And there's no one particular social status when it comes to who's allowing what.

Personally, I f****** hate it. I'd like to throw the iPad right into the pool : ) I've been off social media for about 10 years, (other than LinkedIn, which mostly my nomadic son puts up posts for me. Even a nomad needs a source of income) just became so destructive and hateful. The negativity far outweighed anything positive I could gain from it. And I go all the way back to friendster, I was an early adopter of this new way to communicate.

Yup... That's been the latest fight wanting acrylic nails!

I never did the social media thing. It never made sense to me, even when I should have been an early adopter. It quickly went from “Oh, this is pretty cool to connect with people I haven’t seen in 10-20 years!” to “Great, they’re all doing fine!” to “Yeah, I don’t really give a rat’s ass about the daily minutia of them living their lives.” It’s great that you’re proud of your son graduating elementary school, or how you discovered what fettuccine al Freddo is actually supposed to be on your recent trip to Italy, but whatever. I’ll hear about it next time I see you in person, which may be never, in which case how much does it matter for me to know.

Now that the latest generation has morphed social media into a real-life version of the movie Clueless, I am entertained by the ongoings. That said, I feel for you, Keith given that this is so far from the person you were growing up. But one thing I’ve learned in life is that children are whomever they’re going to be, and the personality is going to be whatever they’re born with. You can hope to guide it, but you can never change it. Unlike friends, you don’t get to choose your family.

I was recently entertained by a conversation (in-person!) with a close high school friend visiting NYC. He was regaling stories about the differences between his older and younger daughters, who are only a couple of years apart. The elder is a “model child” while the younger is self-absorbed and hooked to social media, what her Clueless friend are doing, etc. and totally unaware and not caring of other peoples’ feelings and situations. After a come-to-Jesus discussion with her dad, she explained herself as “I’m just a selfish person” and promised to try harder to be better. Goddamn kids these days! We had clueless, selfish people back in the day, but at least they wouldn’t have the audacity to admit it!

@nada - there is a saying I like which encapsulates the morphing of internet use / social media over the last 10 years

"The internet used to be a place you went to escape the real world, now the real world is somewhere you go to escape the internet"

Further.. looking back, all of the "democratization of __" and "wisdom of crowds" stuff 10-15 years ago is pretty funny.

Good saying. I’ll also note there was a period before that where “The Internet is a place where you go to learn about the real world.’

Wisdom of the crowds doesn’t work so well when your crowd is full of Clueless characters hustling for $$$.

@nada: "She made her New York society debut in 1978...,"

Yes. A browse through old NYTimes (I'm thinking late 40s through the early 60s) will clearly show that the society pages covering debutante and other social balls were the social media of their day. (contrast with the old adage : "There are only 3 times when your name should be in the paper: your birth, your marriage, and your death").

Then there are some of us who are quietly internet legends.

@nada very true regarding the parenting /shaping of children. So many examples to draw from .Happily otherwise, she's a very interesting little kid, with a big heart. I think that's also very true with adults, no one can change us, other than ourselves. I had that aha moment, never thought there was anything wrong with me.... Until something happened that allowed me to see myself from the outside. What an amazing thing to have a paradigm shift in your forties!

>>$4500 in rent!!! That is nuts and I don't think typical. I would have been sharing a 1 bedroom by splitting the living room into two.

>>At this sorta income, I was probably spending somewhere less than half of what she’s spending on rent.

Personally, I paid under $3500 for my last 1-br rental (and obviously there were two of us, both with a high income). But I was also paying back some 6-digit student loans. If you mention those student loans to a European person, they would likely be very, very shocked, and might question my choices and my sanity.

A lot of younger people in NYC are "smoothing consumption" by spending more than the recommended 30% of income on rent (expect income growth in the future, want to spend more of their income today, as marginal dollar of spending today is more valuable than that in the future when they have more dollars). It does not always make sense to match income and consumption. Students spend more than they make, and many young adults treat few years in NYC as a continuation of that, a phase in their life. And they "did not move to NYC to live far away from the fun and nightlife". It is worth it to them to overspend on rent (and save on other things such as no car and car insurance, less savings, etc). The woman is also 28, and she might be at that age when some people want to experiment living on their own, without roommates.
Finally, if she got approved for the apartment, she must have had the income, right? Alternatively, she had a hard time finding an apartment that she could get approved for, and this particular landlord agreed to take a chance on her, so she had to take the lease, but the apartment happened to cost $4500. There are a lot of ridiculously expensive apartments in NYC and there are people living in them... do you think they all meet 30% of income qualification? Where would they go otherwise? There are not enough lower priced market rate apartments available, and the subsidized apartment options are just not for any newly arrived people, as older generations are hoarding them and are never going to move out.

“There are not enough lower priced market rate apartments available, and the subsidized apartment options are just not for any newly arrived people, as older generations are hoarding them and are never going to move out.”

Very true. I recently meet a very nice older woman in San Francisco. She was almost bragging about how she and her husband had been living the last 30 years in a rent controlled unit in a very pricey part of San Francisco, and how her rent of <$2k/month was so much less than the $6k market rent. Both her and her husband have excellent jobs and could easily afford to live elsewhere. I said to myself, this person is never, ever moving. That’s fine, but she also mentioned how many of her friends in the same building owned second homes in the Bay Area which they used on weekends, holidays, etc….Don’t mean to hijack the thread to a rent control discussion but your point is very valid that a lot of the lower priced apartments out there in cities like NYC and SF are simply unavailable to younger people

Of $2k per month was so much less than the market rent of approx. $6k. Both her and her husband have excellent jobs and most likely could easily afford to live elsewhere. I thought to myself, these people are never going to move, and the apartment will never be available to someone who actually does not have such a high income and could benefit from living in a rent controlled unit

If someone bought 30 years ago, they'd also be paying less than current costs of rent.

@Rinette, chances are, they would have sold and rolled profit into another unit that would be more optimal for them today, while making their old unit available for someone else to live in. Since subsidized rent apartment tenants cannot take the deal with them, so they stay in the same unit a lot longer.

Krolik, thanks for your thoughts. There have always been people who spend more of their incomes, and they all have their reasons. What I’m most interested is in whether there has been a shift, particularly with the younger generation. Do you notice this, or is it the same as ever from your perspective?

>> A lot of younger people in NYC are "smoothing consumption" by spending more than the recommended 30% of income on rent

The notion of “recommended 30% of income on rent” is strange to me. I thought I was misreading your words, as to me 30% was sort of a “do not exceed” threshold, equal to the “income must exceed 40x rent” threshold. But then I searched for it.

Some places sensibly classify it as a “do not exceed” threshold. E.g., that is the threshold of being “rent burdened”. I recall doing the math long ago, and to me 40x rent roughly meant the LL can reliably get paid while you live an unsustainable life that leaves zero for savings, retirement, etc.

But then others now suggest it as a good rule to follow. As in “The 30% rule: aim to spend about 30% of your income on rent”.

What a wonderful place the Internet has become…

I always followed cheap rent when I lived in NYC. In the early '90s that meant I could get a studio or very small one bedroom for $600 to $800 per month in the West village. I lived in small, 'charming' apartments because my kids went to school in the West village, and quite frankly it was my favorite neighborhood. I was also able to find a small one bedroom in the not very glamorous gateway Plaza in battery Park City, I paid about $900 a month for that. I followed cheap rents out to Brooklyn, moving to fort Greene towards the end of the '90s, where I paid $1250 a month for a renovated/ repurposed armory, two bedroom two bath (171 Clermont avenue).

From there I moved to Washington heights, where I found a large pre-war two-bedroom one bath, that I paid $1450 a month for, The famous triple nickel building: 555 edgecomb avenue.

I always put a premium on paying as little rent as possible. And it's still doable, but you're going to have to be flexible on where you live. I found it somewhat fun and got to explore a lot of neighborhoods I may not have been naturally drawn to. But in the end I wound up appreciating all of them, for what they had to offer.

Keith Burkhardt
TBG

>> I always put a premium on paying as little rent as possible…

Me too … compared to sale price.

One of the reasons I have always been able to find compelling places is that I’m game for any neighborhood. I’m on my 7th in NYC. All in Manhattan, not because I’m not open to elsewhere, but this is where pretty much all my inventory ends up being.

Being able to experience the different neighborhoods is a big perk. When I live somewhere, I go out exclusively in that neighborhood. Partly because of lazy, partly because I’m not going to bother going back once I leave.

Some neighborhoods, I end up liking as much as I had expected. Others have surprised to the upside or downside. But I’m glad to have experienced them all. And the homes.

I have noticed a weird trend with some young people since pandemic: rent a too expensive furnished apartment in Manhattan, but only live there 2-3 months out of the year, get the place sublet the rest of the time, while working remotely and traveling all over (from Miami to Austin to international destinations). I know more than a dozen young people doing this.

“I have noticed a weird trend with some young people since pandemic: rent a too expensive furnished apartment in Manhattan, but only live there 2-3 months out of the year, get the place sublet the rest of the time, while working remotely and traveling all over (from Miami to Austin to international destinations). I know more than a dozen young people doing this.”

Do you think they are illegally subletting the unit, ie, without the landlords knowledgeable or permission? This is one of the biggest fears I have as a landlord, I am always checking Airbnb looking for the condos I own in various cities to see if they are illegally being sublet. Because if the tenant can get a rent over what they are paying, the can actually make money doing this

Yes, illegally. But they are not subletting nightly on airbnb. Usually for a few weeks to months at a time, thru a network of friends or via special facebook groups. Overpriced rental buildings with a lot of units are better suited to this, although i have seen some older units advertised a few times, could have been condos/coops.

It does indeed sound like an AirBnB side-hustle.

I recall a variant of this circa ~15 years ago. Relatively junior banker (VP, say) spends inordinate amounts of time playing small-time RE mogul by checking out of work while renovating a home on the side with intention for profit. I couldn’t figure it out. Motivation was financial, but it seemed like very linear wealth thinking. One was in a very good seat — on the team of the vice chairman of a major bank — but thought the game was milking a paycheck while renovating and building out a pretty small-time business venture.

Yes I guess if you are going to do this, it’s risky to do it via Airbnb or other very visible public online channels because you could get caught. Much better to do it through friends or private Facebook channels. I can easily see a landlord having no clue. As long as he/she gets the rent, no complaints. The “guest” presumably has been warned to never contact the landlord for any repairs or any other issue. Landlord always needs 24 hours notice to enter so presumably the original tenant can arrange to be present. I guess if the original tenant is traveling far away and the landlord gives a legitimate 24 hours notice for entry, it could get dicey. But I can easily see people taking the risk. This would allow guests to reside in a unit whom, although they might be able to afford financially, perhaps due to issues that would come up during a background check, or a desire to not sign a long term lease, both would disqualify them from ever “legitimately “ residing in the unit

@nada no doubt, you have made some masterful moves with renting some of the most expensive property in NYC especially relative to buying which is what I know you care about.

We had "Super Terrific Niece" weekend last weekend in NYC with three out of five of our nieces. The oldest one has quite the trust fund coming, but her parents have done a masterful job of keeping it secret from her, and she won't get control of it until she is 30. She is hardworking, responsible and driven. She makes good money as a recent college grad living in Alphabet City in a tiny apartment that she shares with friends. This article made me think of her: https://finance.yahoo.com/news/cant-afford-friends-anymore-gen-213310717.html She is shocked at how many of her friends blow their entire paycheck on going out, clothes and housing and opts out of many social events as a result of her frugality. I am really proud of her for budgeting and being financially responsible.

Good to hear there are a few of this species still left in the wild.

I’m surprised that she has so many friends that are spenders. Not because they don’t exist, but rather because these sorts of things are usually self-selecting.

That shows character. It's so easy to go along with the herd.

>Landlord always needs 24 hours notice to enter so presumably the original tenant can arrange to be present.

Landlord needs 24 hours notice, or else what?

>Landlord always needs 24 hours notice to enter so presumably the original tenant can arrange to be present.

These subletting people are typically renting from large corporate landlords that are not going to know that this is not the right person in the unit as they have too many tenants to keep track of. The tenants are also in on the scheme. I don't think this really is a side hustle, more of a situation where people love traveling for a few months at a time while working remotely, but apartment leases do not work like that typically.
However, since they are planning to sublet the place most of the time, they do tend to get flashy overpriced places.

>> Relatively junior banker (VP, say) spends inordinate amounts of time playing small-time RE mogul by checking out of work while renovating a home on the side with intention for profit.

1) needed a hobby and didn’t know what he was getting himself into? Looks fun and easy on hgtv
2) didn’t want/could not stay in banking and was looking for an exit/ career change?
3) read one of those personal finance books that paint flipping houses/RE as one of the only available paths to financial independence? It was trendy at some point. Or comes from country/culture where real estate is seen as the primary way to build wealth (China for example)

Few years ago, I have seen a 2nd year analyst (consultant or banker, married) purchase a new construction 2br/2ba condo on UWS. High floor, nice amenities, in-unit washer dryer. The price was 1.7m, and taxes plus common charges around 5k monthly. They were getting a max size conforming loan and the rest was cash from in-laws. I thought this was some pretty crazy spending, but they thought this was a way to build wealth. They were Chinese, so there might have been a cultural component.

In China, in upper middle class or richer, the husband's family is supposed to buy the newly weds an apartment. And then eventually parents in their old age move in with the kids. Then there are a lot of Chinese nationals trying to set up back-up roots in America with having a home a priority (kids go to American universities) and they try their best to get some money out of China and not keep it in a bank account. Just look at transformation of Flushing in the last 20 years.

Krolik, thanks for clarifying the situation you’re seeing not being a side-hustle.

On what I had seen, those could have all been motivations (though not necessarily all in the same person at the same time).

Re "I’m surprised that she has so many friends that are spenders. Not because they don’t exist, but rather because these sorts of things are usually self-selecting."

She is relatively new to NY (six months in) and is meeting people at the usual pace that a recent college grad entering the world does. Accordingly, I'm not sure "friends" is the right word in my definition for all those she spends time with at the moment, but one of the things I love about her is that she is an extravert and pretty much likes everyone. She will figure it out.

Observations (maybe I should start coming here more often again)

https://www.wsj.com/personal-finance/the-surprising-effect-friends-have-on-our-finances-fe986ae5?page=1

This is not really new. Madame Bovary. One party and she couldn't stop trying to recreate it. Also compare Barbara Hutton to Doris Duke.

@stache - Nice job tying it all together!
https://www.townandcountrymag.com/society/money-and-power/a9540335/doris-duke-barbra-hutton-feud/

>> I’m surprised that she has so many friends that are spenders. Not because they don’t exist, but rather because these sorts of things are usually self-selecting

There are more important criteria for friends. Also, it takes time for these habits to rub off. Might still happen at some point in the future.

>> She is relatively new to NY (six months in) and is meeting people at the usual pace that a recent college grad entering the world does. Accordingly, I'm not sure "friends" is the right word in my definition for all those she spends time with at the moment

Makes sense, it sounds like people she has met and with whom she is “experimenting” friendship. I.e., more a slice of NYC society than the one she as chosen as “hers”.

>> There are more important criteria for friends. Also, it takes time for these habits to rub off. Might still happen at some point in the future.

I didn’t mean it as “pick friends who are spenders vs not”. Rather, “friends you pick tend to behave similar to you”. I am somewhat surprised, but then again not, by how pretty much all my closest friends, some dating back to late elementary school or middle school, have ended up highly aligned with me on values, etc. despite decades of life and time to diverge.

@nada - Here is a question for you: Are your values aligned with those of your parents? If so, chances are you were surrounded from the get-go with individuals with similar values, so your gravitating to such individuals was natural. What would be extraordinary is if in elementary school and through high school you gravitated towards individuals whose values were anathema to your parents. I don't know anyone who has done that.

>> Also compare Barbara Hutton to Doris Duke.

Stache>> I had never heard of them, but boy what a miserable pair!

>> Here is a question for you: Are your values aligned with those of your parents?

In some respects yes, in others no.

So, my parents did not instill in me the values I hold today. It wasn't until I entered the real world that I knew there were other paradigms out there. Based on my own personal experience discovering there was a whole world out there, I am curious to see if what I view as the "bad habits" of my niece's new acquaintances rub off on her the way the "good habits" of my new acquaintances when I was that age rubbed off on me. My childhood friends and parents were most distressed when that started happening. My niece's parents (who, by definition, include one of my siblings) will be devastated if my niece chooses values in adulthood that are anathema to them. I do not think she will, but time will tell.

Frankly, I’m surprised that you originally took on the values of your parents when your “innate” nature seems to point in another direction. Teens are supposed to take every opportunity possible to disagree or otherwise rebel against their parents. All I can imagine is that your entire peer circle at school was rather uniform.

FWIW, I doubt the “bad habits” will rub off on your niece.

If you talk to anyone who knew me before the age of 21 I am pretty sure they would all say "she was really quiet." I was quiet because I did not connect with many until I got out of my sheltered world. It was such a dramatic shift that I became convinced I was switched at birth. However, 23and me came back exactly as advertised. With that said, while I don't share some key values with my parents, I do share others - education, hard work and frugality. My frugality is the bane of Mr. MCR's existence.

I grew up in a specialized environment (military families), and at the time, it was a self-selecting group of shared traditional values, so I had lots of friends who mostly all thought & behaved alike. I rebelled against a big part of it (conformance, authority, religion, blind patriotism), and was happy to experience a broader slice of the world in college and afterwards (far away from them). That said, there are still large parts of my parents' values which I never disposed of, but really none that I rejected and then later re-adopted. It's been fascinating to see my brother managing his kids, as both my parents are evident in his words and actions (but with more modern methods).

My wife's Midwestern frugality, saved me! I think at some level I'm an amalgam of the many, many different family members that I was involved with along with the books I read and the music I listened to . And later in life, I happily morphed into my first generation grandfather, who was the quintessential 'millionaire next door.' He did have some peculiar habits though, I remember once orange juice must have become quite expensive, relative to what it usually costs. Orange juice was suddenly missing from their refrigerator for many months : )

It's interesting how we become who we are. And I wonder how much influence over that we have over ourselves? And even more interesting how we become so anchored in these beliefs that we've cultivated or been introduced to, simply by random circumstance.

Most of the people on this board with “frugal traits” and modest upbringing have actually always been at least middle class.
Extreme frugality is not always the greatest trait. Sometimes you need to spend money to make money, but some people that grew up very poor don’t go to expensive schools because they “can’t afford it” (and have an extreme aversion to debt). They might also not be able to bring themselves to buy a suit at a mid-price retailer. But tjmaxx suits and similar poor person habits can be detrimental to many careers.

@krolik - I never take for granted the incredible privilege I was born into the world with. I have a number of extraordinary students right now (I teach English to immigrants at the public library in the evenings twice a week) who are as you describe. What is even harder is that they don't have access to credit. I agree that you need to spend money to make money and never skimped on any tool that was useful to my career, whether that be a new computer or the right suit. My weekend wear might be TJMaxx or Target, but my work wear never was.

P.S. - Truth be told, I was never a TJMaxx or Target shopper; I was all in at Loehmann's and miss that fabulous chain to this day. The one right off of Union Square in San Francisco was my best retail friend until the day it closed. My two favorite stores were Barneys for clothes that were investments and Loehmann's for everything else. Both are gone and I have not found a replacement for either.

Century 21 was also pretty good back in the day.

@keith - I agree! Century 21 replaced the Barnes and Noble near The Phillips Club and visiting nieces staying there introduced me to it in 2018, but then it, too, closed. I need to look up what is occupying that retail space now; probably another store I will love and become attached to that will be gone the next time I check.

I don’t think anyone could look at my lifestyle and plausibly consider it “frugal”. To me, that word implies a degree of spending no more than one needs. I sure as hell don’t need to spend anywhere as much as I do to have what I would consider a happy life.

I’m probably better characterized as “economical”, in the sense of not being wasteful — of money, resources, or opportunity. During one phase of my life, that looked like frugality. “Do I really care to spend all $100 of income when last year I was perfectly happy spending only $30 of my entire $30 paycheck? Wouldn’t it be better to balance the spending at a level I would actually truly be able to plausibly use well — $50 say — with future opportunities that saving the remaining $50 could bring?” But then that morphed into something that is definitely not frugality — “Yeah, I could remain perfectly happy spending only $50 out of $1000 in income — but to what end? That would be wasteful of the present opportunity to incrementally enjoy — say $100 — with very little incremental benefit to future opportunity”.

@Aaron - re "I grew up in a specialized environment (military families)," I had never had any exposure to that community until I worked for USG overseas. One of my best friends from that time period whose family is fully steeped in that culture is still struggling with whether or not she should break free.

>> Few years ago, I have seen a 2nd year analyst (consultant or banker, married) purchase a new construction 2br/2ba condo on UWS. High floor, nice amenities, in-unit washer dryer. The price was 1.7m, and taxes plus common charges around 5k monthly. They were getting a max size conforming loan and the rest was cash from in-laws. I thought this was some pretty crazy spending, but they thought this was a way to build wealth. They were Chinese, so there might have been a cultural component.

I do wonder whether this is so crazy. Their income was $300k-$400k at the time of purchase and plausibly on its way to $600k-$1000k over the next 10 years. They could have been looking at the $1m from parents as “dead money” otherwise earning 0%, considering their spending as $5k on monthlies and perhaps $2k in interest at 3%.

Say current income was $350k. Is $7k spending on housing too much, with income at 50x? Perhaps. OTOH, income will likely trend towards a point where they’d be 100x+.

They seemed convinced that RE was the path to untold wealth. While renting a 1BR for $3500 and investing $1m would have been more my speed, I think buying such a right-sized place for (say) $850k would have been a worse decision for them. Not only would they have been less levered towards their foreseen untold wealth, but they would’ve taken a hit with transaction costs of a place they’d soon outgrow.