Americans are giving up their mortgages to ‘rent forever’ in larger homes with lower monthly costs – but experts warn of terrible downsides

Families who have turned their backs on the struggle to own a home in the overheated real estate market say they have few regrets — even if it means selling out forever.

The share of single-family homes built for rental has doubled in two years as companies look to those fed up with mortgage payments.

Analysts warn the trend will only push up prices for those determined to buy, but the temptation to halve their housing costs and leave the worries of ownership behind them is proving hard to resist with a third of all rental properties are now single-family homes.

Chelsey and Spencer Marks had just spent thousands of dollars repairing the air conditioning in their California home when they realized they needed to buy new windows and a replacement pool pump.

“I thought, I can’t do this anymore,” Chelsey, 41, told the BBC LA times. “One day I came home and thought, ‘We’re selling the house.’

The couple erased their debts and improved their living standards in a new rental neighborhood 15 miles away in La Quinta.

They moved 15 miles away from Cathedral City to SolTerra, a 131-home subdivision built solely for rentals, wiping out their credit card debt, boosting their savings and making an Italian vacation possible.

“I don’t have to own it to live the life I want to live.”

Mortgage rates have doubled in the past three years and the US Federal Reserve announced on Wednesday that the base rate will remain at a 23-year high.

The California Legislative Analyst’s Office calculates that monthly payments for purchasing a median home have increased 80 percent since the beginning of this decade, when taxes, maintenance and insurance are taken into account, making it twice as expensive to own a to buy a two bedroom house than to buy a two bedroom house. rent it.

Erick Carcelen, 47, realized he would pay $6,000 a month to buy his dream home before moving with his wife and three daughters into a four-bedroom, three-bathroom rental home in Menifee.

“I’d rather pay $3,800 and say, I feel incredibly comfortable,” he said.

Corporate investors became seriously interested in the rental market after the 2008 credit crisis and are now increasingly building entire rental properties, according to Doug Ressler of commercial real estate company Yardi Matrix.

“There is still an inadequate supply of housing, the cost of housing has continued to rise and tenants are renting for longer,” he said.

“The major providers view rental properties as a legitimate strategy to meet the demand of people on a limited budget who want more square meters than an apartment.”

Erick Carcelen, 47, cut his monthly housing bills from $6,000 to $3,800 by moving with his wife and three daughters to a new development in Menifee.

Now his family enjoys amenities such as a pool, spa and clubhouse in a gated community

The 300-home estate was built exclusively for rental by Tricon Residential, a development company bought last month for $3.5 billion by Blackstone, the world’s largest private equity firm.

Developer Bill Shopoff of Shopoff Realty Investments built the SolTerra estate in La Quinta after realizing massive untapped demand for larger rental properties.

He outfitted his three- and four-bedroom homes with Spanish-style roofs, colorful mosaic tiles, private garages and state-of-the-art appliances.

Tenants can get to know each other in the communal swimming pool, clubhouse and landscaped parks.

The estate opened last summer with rents ranging from $3,299 per month for a 1,520-square-foot home to $4,460 for those with a 2,400-square-foot home.

“I’m not sure if you didn’t see the rental sign you would be able to tell the difference,” he said. ‘That is our intention. It’s alive and feels like you’re a homeowner.

California Assemblymember Christopher M Ward is drafting legislation in an effort to rein in the new rental giants

“That looks like a gap in the market that we should try to solve.”

Some of the world’s biggest companies have reaped big profits from the distorted housing market and Blackstone, the world’s largest private equity fund, last month bought leading developer Tricorn Residential for $3.5 billion.

It built the Carcelen home along with 300 others in Menifee and 170 in neighboring Wildomar, with plans for another 493 in Winchester.

But critics have warned that the American dream of homeownership is becoming increasingly out of reach for young families being squeezed out of a market now focused on renting.

California Assembly member Christopher M Ward is drafting legislation in an attempt to rein in the new rental giants, warning that corporate investors have “a significant advantage over a typical California family.”

“You are allowing a new phenomenon in transactions that is inherently non-competitive,” he added.

But Shopoff says business interest is increasing the number of homes being built, allowing people to achieve an otherwise impossible lifestyle.

“It is interesting that the government wants to limit capital, but capital only responds to demand,” he added.

The share of single-family homes built for rental is now the highest since data began being collected in the 1970s, but some renters are determined to return to homeownership.

Roofer Deonte Palm is one of Carcelen’s neighbors on the Menifee estate after moving from an apartment where “we felt the walls closing in on us.”

“I thought, I can’t do this anymore,” said Chelsey, 41. “One day I came home and I thought, ‘We’re selling the house.’

SolTerra opened last summer with rents ranging from $3,299 per month for a 1,520-square-foot home to $4,460 for those with a 2,400-square-foot home.

Tenants can get to know each other in the communal swimming pool, clubhouse and landscaped parks

The 30-year-old has now moved with his wife and new baby into a four-bedroom new build that they share with his brother, his girlfriend and their two-year-old.

The two families happily split the $3,400 rent between them while they wait for mortgage rates to drop.

“Save more space and money,” he said.

But Ressler warned that those who move into rental housing risk being permanently locked out.

“The rising costs of housing and mortgages will continue for an extended period of time,” he added.