Amid ongoing housing market worries, a real estate developer has claimed that there is now no longer any such thing as a starter home. Big cities in the United States do not have these types of homes nowadays — as no one can afford to buy them.
Instead, many Americans are becoming what is called “forever renters.” This has resulted in new apartments being built in big U.S. cities that are dedicated to people who want a home, yet can’t afford one.
The Current State of the Housing Crisis
The housing market remains in a bit of a crisis in various areas around the United States. Home prices are incredibly high, even in areas where prices may have dropped.
This is for a variety of reasons. A lack of inventory on the market keeps prices rising. Elevated mortgage rates also haven’t helped matters. An increase in the overall cost of living has also limited the amount of money people have to spend on homes.
The Creation of Forever Renters
Because so many Americans cannot afford to buy a home, many people are now being called “forever renters.” Forever renters are people who will rent for much, if not all, of their lives — simply because they have no other choice.
Many analysts have stated that these people, particularly many Millennials, have been shut out of the housing market. If the housing crisis continues, they may remain unable to buy a home.
The Death of Starter Homes
Real estate developer Michael Pestronk, who is the co-founder and CEO of Post Brothers, stated that starter homes are no longer available for people in big U.S. cities.
“There’s no such thing as a starter home in large [metropolitan statistical areas] anymore,” Pestronk explained. “There is no land available to build housing within commutable distances of jobs.”
The Rise of Renters
This has led to more forever renters. As there are no starter homes — or a large amount of affordable inventory to choose from on the housing market — Americans are choosing to rent.
“And so for better or worse, the starter home in big cities has become a bigger, better apartment,” Pestronk added.
The Average Renters
Pestronk also took a look at what the average renter looks like now. The profile of a normal renter has changed in just the last few years alone, thanks to the ongoing housing crisis.
“We have a mid-Atlantic focused portfolio. Our average renter 10 years ago was 29. Today it’s 33. But we also have way more renters of the 35 to 45 [age range] making well over $15,000,” he explained.
New Types of Apartments
As more Americans are identifying as forever renters, real estate developers are looking to create new types of apartments for them.
As a result, many developers like Pestronk are creating apartment complexes designed for those looking for long-term renting options. Often, these apartments are bigger and specifically cater to forever renters.
Some Prefer Long-Term Renting
A recent survey has helped shed some light on the mentalities of these renters. The study found that about 66% of multifamily renters are satisfied with how they are currently living.
This is because they can rent in the areas they want to live in — even though they cannot buy homes in this same area. Renting also gives them more flexibility than owning a house does.
The Cost of Owning a Home
Thanks to rising home prices, Americans must make more money to own a home today than they did just 10 years ago. As a result, affordability remains a huge issue throughout the country.
According to the State of the Nation’s Housing report from 2023, one must make at least $117,000 to afford an average home in the United States.
Living in Certain Neighborhoods
Many people have also struggled with being priced out of the neighborhoods they want to live in — especially in big cities. However, renting in these areas has become desirable for these people.
Therefore, even though they cannot own a home in their preferred neighborhood, they often can find an apartment to rent in that very same area. This has also often increased forever renters in big cities.
Pestronk’s Apartments
As a real estate developer, Pestronk has capitalized on working professionals who will remain forever renters. However, his apartments cannot be considered cheap.
On average, these two-bedroom apartments are $4,000 to $8,000 a month. However, Pestronk states that they are created for “older, more sophisticated” people and professionals. These apartments are often bigger and more spacious than your average apartment.
Family Friendly Apartments
Pestronk has also stated that these apartments are child-friendly. They have indoor and outdoor playrooms and playgrounds for families who live in these complexes.
Pestronk did say he realizes these aren’t cheap units to rent out — but they do give some people in bigger cities the option to live comfortably in an apartment. “It’s not inexpensive, but compared to the cost of ownership, it’s favorable,” he explained.
