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  • Writer's pictureRealFacts Editorial Team

Another Hurdle to Homeownership — $18K Average Extra Costs Causes Average Apartment Sizes To Increase

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In the current real estate landscape, potential homeowners are increasingly facing a daunting array of additional costs, pushing the dream of owning a home further out of reach for many. According to Bankrate, the average annual cost of owning and maintaining a single-family home in the U.S. now exceeds $18,000. These rising costs have prompted a shift in housing preferences, with more families turning to larger apartments as an alternative.

The Hidden Costs of Homeownership

Buying a home is often heralded as a pathway to building equity and personal wealth. However, beyond the mortgage, homeowners must contend with a slew of additional expenses. Property taxes, homeowners insurance, home maintenance, and utility bills add up quickly. Bankrate’s recent study revealed that these extra costs now average more than $18,000 annually for a typical single-family home, representing a 26% increase from four years ago.

In states like Hawaii and California, the costs are even more staggering. In Hawaii, homeowners face an average of $29,015 in additional annual costs, driven by high property maintenance and energy bills. Similarly, California homeowners incur nearly $28,790 in extra costs each year. These expenses create significant financial burdens, making homeownership increasingly unattainable for many.

A Shift Towards Larger Apartments

As homeownership becomes more expensive, many families are looking for alternatives that offer space and affordability. This shift is reflected in the recent trend towards larger apartment units. Data from RentCafe indicates that the average apartment size in the U.S. increased by 27 square feet in 2023, reaching 916 square feet. This growth marks a reversal from previous years when apartment sizes were shrinking.

Meeting the Demand for Space

The increase in apartment sizes is largely driven by the development of more spacious two- and three-bedroom units. These larger apartments cater to families who need more living space but find homeownership financially out of reach. Developers have responded to this demand by adjusting their floorplans to accommodate the need for larger living spaces.

Interestingly, the distribution of apartment types has remained relatively stable over the past decade. However, there has been a slight increase in the proportion of three-bedroom units, which now account for 7.3% of new apartments, up from 7.1% a decade ago. These three-bedroom units, averaging 1,350 square feet, are comparable in size to build-to-rent houses, which typically offer about 1,400 square feet.

The Economic Context

The economic conditions contributing to these trends are multifaceted. The cost of building materials and labor has soared, driving up the overall cost of home construction. This has, in turn, influenced the rental market. As home prices have climbed, the financial gap between renting and owning has widened. In the first quarter of 2024, the monthly cost difference between homeownership and renting reached $824, an 18.4% increase from the previous year.

With mortgage applications for home purchases at a nearly 14-year low, many families are opting to rent rather than buy. The rental market has responded by offering larger, more family-friendly apartments, addressing the needs of those who would have traditionally sought single-family homes.

Regional Trends

Certain cities have seen significant increases in the size of new apartments. Tucson, AZ, leads with a 33.1% increase in average apartment size, followed by Corpus Christi, TX (20.1%), and Gainesville, FL (19.7%). These changes reflect a broader trend towards accommodating the needs of families in the rental market, offering more spacious living arrangements as an alternative to the high costs of homeownership.

The rising costs associated with homeownership are prompting a significant shift in housing preferences. As families seek more affordable and spacious living options, the demand for larger apartments has surged. Developers are responding by building bigger units that can provide the space and comfort that families need. This trend highlights the evolving dynamics of the housing market, where the traditional aspiration of home ownership is increasingly giving way to the practicality and affordability of renting larger apartments.


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