Investing in the Detroit housing market has been a source of contention for investors for a long time. The effects of the pandemic are visibly diminishing in 2021, and other indicators show that the city is beginning to recover its footing. When considering whether or not to add properties in the Motor City to your portfolio, keep these three current trends in mind. The city of Detroit is one of the most populous in the Midwest. It also serves as the county seat for Wayne County.
When it comes to residential in Detroit, home prices are exceptionally low. The median price was $75,000 in August 2021, a growth of over 35% from last year. The rentals can generate extremely high returns on investment. Since the purchase price of a Detroit single-family home is significantly less than $100,000, it presents a fantastic opportunity with significant returns and cash flow.
Although the city’s population is shrinking the number of millennials who are relocating to Detroit is steadily increasing. According to a recent study conducted by the Detroit Chamber of Commerce, metro Detroit experienced the second-highest growth among peer cities for people between the ages of 24 and 35 over the previous decade, ranking second among peer cities overall.
Even though prices in the Greater Metropolitan Area of Detroit have increased by more than 12 percent year over year, the median home price of $230,000 is significantly lower than the national average of $359,900, providing investors with significant room to maneuver in terms of their profit margin. Is Detroit going to be one of the hottest real estate markets for investors in 2021 & 2022? Let’s take a look at the latest Detroit housing market trends to come to a conclusion.
Michigan Housing Market Trends 2021 (Most Recent Stats)
Michigan real estate is becoming more expensive as more buyers compete for the same properties. The statewide data on residential homes from the 42 regional listing boards that comprise the Michigan Association of Realtors show that the average sales price increased 11.79 percent from a year earlier in July 2021. The median home price in Michigan went up from $219,549 to $245,439. The total residential sales in the state recorded a decline of -18.12% year-over-year, from 15,696 to 12,852 sales.
Low interest rates are still attracting buyers even though there are fewer homes available for sale. The rising prices are a reflection of a healthy Michigan housing market. A new high-water mark is being set in the number of sales in many Michigan communities. Compared to the previous year, homes in the Greater Metropolitan Area of Detroit area stayed on the market for an average of 18 days in August 2021. Several regions saw home price gains of 15 percent or more, including the City of Detroit, where the median home price shot up from $140,738 to $230,447, according to Realcomp August 2021 Statistics.
Other large price gains in the Detroit Area housing market were made in:
City of Detroit, +36.4%
Huron County, +30.3%
Sanilac County, +30.3%
Dearborn/Dearborn Heights, +16.4%
Downriver Area, +16.2%
Genesee County, +15.2%
Lapeer County, +19.8%
Livingston County, +16.3%
Tuscola County, +18.3%
The FMHPI is an indicator for typical house price inflation in the United States. It indicates that home prices increased by 12.2 percent in Michigan in 2020 as a result of strong housing demand and record low mortgage rates. Growth has accelerated to 18.66% from June 2020 to June 2021. The current Freddie Mac House Price Index for Michigan is 161.34 (June 2021).
10-year % Change in House Price Index: 118.6%
Annual % Change in House Price Index: 18.7%
Quarterly % Change in House Price Index: 5.4%
Monthly % Change in House Price Index: 1.8%
According to Redfin, a real estate company, home prices in Michigan statewide were up 9.5% year-over-year in August 2021. At the same time, the number of homes sold fell 7.1% and the number of homes for sale fell 21.3%. The latest trends show that the Michigan housing market is becoming increasingly competitive, with bidding wars becoming more common. A large or increasing percentage of homes are selling for more than the asking price. In August 2021, 50.9 percent of the homes sold for more than the asking price, representing a 15.4 percent increase year-over-year. This percentage was 25.2 percent two years ago (in August 2019).
Top 5 Most Competitive Housing Markets in Michigan in 2021
1. Kentwood, MI: In August 2021, Kentwood home prices were up 19.5% compared to last year, selling for a median price of $262K. On average, homes in Kentwood sell after 7 days on the market compared to 6 days last year. There were 70 homes sold in August this year, down from 75 last year.
2. Northview, MI: In August 2021, Northview home prices were up 74.4% compared to last year, selling for a median price of $358K. On average, homes in Northview sell after 7 days on the market compared to 5 days last year. There were 22 homes sold in August this year, down from 28 last year.
3. Sparta, MI: In August 2021, Sparta home prices were down 10.6% compared to last year, selling for a median price of $198K. On average, homes in Sparta sell after 6 days on the market compared to 12 days last year. There were 18 homes sold in August this year, down from 29 last year.
4. Wyoming, MI: In August 2021, Wyoming home prices were up 13.9% compared to last year, selling for a median price of $205K. On average, homes in Wyoming sell after 6 days on the market compared to 5 days last year. There were 103 homes sold in August this year, down from 118 last year.
5. Allen Park, MI: The Allen Park housing market is most competitive (92/100). Homes in Allen Park receive 4 offers on average and sell in around 6 days. The average sale price of a home in Allen Park was $187K last month, up 22.7% since last year. The average sale price per square foot in Allen Park is $155, up 15.7% since last year. Redfin’s Compete Score measures an area’s competitiveness on a scale of 0 to 100, with 100 indicating the most competitive area. The Compete Score is determined primarily by four inputs: the number of competing offers, waived contingencies, sale to list ratio and days on market.
Let us also look at the price trends recorded by Zillow over the past few years. Since Sep 2011, the median home prices in Michigan (statewide) have appreciated by nearly 119% (Zillow Home Value Index). ZHVI reflects the typical value for homes in the 35th to 65th percentile range. Currently, the typical value of homes in Michigan is $214,231. Over the past year alone, the 214,231 home values have gone up by 17.4% due to robust housing demand and low mortgage rates.
Greater Detroit Real Estate Market Trends 2021 (Describes August YOY)
Here are the August 2021 residential stats for the Greater Metropolitan Area of Detroit, including but not limited to locales in Lapeer, Macomb, Oakland, Washtenaw, and Wayne Counties, released by the Greater Metropolitan Association of REALTORS® (provided by Realcomp).
Residential Homes Sold = 4,615
Average Sales Price = $279,291
Months Supply of Inventory = 1.7
Inventory Decrease Compared to August 2020 = 19%
August Year-Over-Year Residential & Condo (Combined) Comparisons:
Median Sale Price was up by 11.9% from $210,000 to $235,000.
The average days on market (DOM) decreased by 56.9% from 51 to 22 days.
The average % of the last list price received increased by 2.2% from 99.1% to 101.3%.
New Listings increased by 3.3% from 16,125 to 16,653.
Average Showings per Home decreased from 10.8 to 10.1.
Pending Sales were down by 10.5% from 14,444 to 12,921.
Closed Sales were down by 12.3% from 13,945 to 12,235.
Listings that were both listed and pended in the same month were at 6,877. This represents 41.30% of the
New listings for the month and 53.22% of the pended listings.
Months-Supply of Inventory was down by 26.1% from 2.3 to 1.7.
Detroit (Wayne County) Housing Market Trends 2021
Wayne County is the most populous county in the U.S. state of Michigan. As of 2020, the United States Census placed its population at 1,793,561 making it the 19th-most populous county in the United States. The county seat is Detroit. Single-family detached homes are the single most common housing type in Detroit, accounting for 66.04% of the city’s housing units. Three and four-bedroom single-family detached homes are the most common housing units found in Detroit. Detroit city has a mixture of owners and renters, with 47.23% owning and 52.77% renting.
As per Realtor.com, in August 2021, the median list price of homes in Wayne County, MI was $169K, trending up 12.7% year-over-year. The median listing price per square foot was $133. The median sale price was $204K. Homes in Wayne County, MI sold for approximately the asking price on average in August 2021. Northville Township has a median listing price of $484K, making it the most expensive city. Detroit is the most affordable city, with a median listing price of $79.9K.
These are the latest stats published by the Greater Metropolitan Association of REALTORS® for August 2021.
Median Sale Price was up by 11.7% from $163,000 to $182,000.
The average days on market (DOM) decreased by 45.5% from 33 to 18 days.
The average % of the last list price received increased by 2.7% from 98.3% to 101.0%
New Listings increased by 11% from 2,486 to 2,759
Pending Sales were down by 2.6% from 2,012 to 1,959.
Closed Sales were down by 11.2% from 2,006 to 1,782.
Months-Supply of Inventory was down by 17.4% from 2.3 to 1.9.
Detroit Metro Housing Market Forecast 2021-2022
What are the Detroit metro real estate market predictions for 2021 & 2022? In the last decade, Detroit has seen some of the highest home appreciation rates in the country. Let us also look at the price trends recorded by Zillow over the past few years. Since Sep 2011, the median home prices in Detroit-Warren-Dearborn Metro have appreciated by nearly 143% (Zillow Home Value Index). ZHVI reflects the typical value for homes in the 35th to 65th percentile range. Currently, the typical value of homes in Detroit-Warren-Dearborn Metro is $223,461. Over the past year alone, home values in this region have gone up by 18.4% due to robust housing demand and low mortgage rates.
Detroit-Warren-Dearborn Metro home values have gone up 18.4% over the past year and the latest forecast is that they will rise 11.2% in the next twelve months.
Detroit City home values have gone up 37% over the past year (current = $58,213) and will continue to rise at a similar pace in the next twelve months.
Wayne County home values have gone up 21% over the past year (current = $145,614) and will continue to rise in the next twelve months.
Oakland County home values have gone up 16.9% over the past year (current = $316,348) and will continue to rise in the next twelve months.
Here is the graphical representation of historical Detroit metro house prices and the latest forecast until August 2022.
Credits: Zillow
According to Neigborhoodscout, over the last decade, Detroit real estate has appreciated 75.30 percent, which equates to an average annual appreciation rate of 5.77 percent, placing Detroit in the top 20% of all cities for real estate appreciation. In the last twelve months, Detroit’s appreciation rates have remained among the highest in the country, at 12.35 percent, which is higher than the appreciation rates in 85.92 percent of the nation’s cities and towns. Short-term real estate investors have found success in Detroit over the last twelve months. Detroit appreciation rates were 2.98 percent in the most recent quarter, equating to a 12.47 percent annual appreciation rate.
Here are the best neighborhoods to invest in Detroit rentals because they have the highest appreciation rates since 2000 (List by Neigborhoodscout.com).
3rd St / W Forest Ave
Gratiot Ave / Antietam Ave
Woodward Ave / W Forest Ave
Michigan Ave / Trumbull St
W Jefferson Ave / Woodward Ave
Trumbull St / Ash St
Ecumenical Theological Seminary / Beaubien St
Saint Aubin St / Holbrook St
E Ferry St / Russell St
Russell St / Wilkins St
Is Detroit Real Estate Investment Overview
Investing in real estate is touted as a great way to become wealthy. Should you invest in Detroit rental real estate? Many real estate investors have asked themselves if buying rental property in Detroit is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Detroit housing market forecast for answers on why to put resources into this market.
Detroit is the most populous city in the U.S. state of Michigan, the largest city on the United States – Canada border, and the seat of Wayne County. The municipality of Detroit had a 2016 estimated population of 672,795, making it the 23rd-most populous city in the United States. New data from the 2020 U.S. Census shows Michigan’s largest city continued a seven-decade trend of losing residents. Detroit’s population decline has been evident in every census since the city’s peak in 1950 when 1.8 million people lived there. Detroit was home to 639,111 residents in 2020, according to new data released by them, a drop of 10.5% or almost 75,000 residents from a decade ago.
It’s also the seventh straight decade Detroit’s population has declined since the census showed the city with nearly 1.85 million residents in 1950 However if you consider the metropolitan area, known as Metro Detroit, is home to 3.53 million people, a 0.51% decline from 2020. According to Wikipedia, it is the second-largest in the Midwest after Chicago. Since many older residents are moving back in and new businesses are bringing increased job opportunities for the city, there could be an upward population growth trend soon.
Although, this article alone is not a comprehensive source to make a final investment decision for Detroit we have collected ten evidence-based positive things for those who are keen to invest in the Detroit rentals in 2021 or 2022. Investing in Detroit rentals will fetch you good returns in the long term as the home prices in Detroit have been trending up year-over-year. Let’s take a look at the number of positive things going on in the Detroit real estate market which can help investors who are keen to buy an investment property in this city.
Is Detroit’s Economy Growing?
Compared to many other real estate markets across the country, Detroit is an affordable market to both invest in or rent real estate in the current year of the housing boom (led by pandemic). The city also has the headquarters of many Fortune 500 companies which is directly proportional to the city’s economic and employment development. The most heavily represented sectors are manufacturing (particularly automotive), finance, technology, and health care.
The most significant companies based in Detroit include General Motors, Quicken Loans, Ally Financial, Compuware, Shinola, American Axle, Little Caesars, DTE Energy, Lowe Campbell Ewald, Blue Cross Blue Shield of Michigan, and Rossetti Architects. On May 21, 2014, JPMorgan Chase announced that it was injecting $100 million over five years into Detroit’s economy, providing development funding for a variety of projects that would increase employment. It is the largest commitment made to anyone city by the nation’s biggest bank.
Between 2010 and 2019, the Detroit metropolitan area’s economy expanded, and labor force participation increased. Automobile manufacturing continues to be Detroit’s largest industry. Despite losing nearly 40% of its manufacturing jobs in the 1980s, the automotive industry continues to be the city’s primary economic driver. According to UofM, between 2012 and 2019, Detroit’s poverty rate plummeted from 42.3% to 30.6%. This equates to 77,000 fewer Detroiters in poverty in 2019.
Detroit’s nearly 12 percentage point decline in poverty was larger than that of most large industrial cities in the Midwest and Northeast. For comparison, Cleveland and Philadelphia saw declines of 5.3 and 3.6 percentage points, respectively. Detroit’s poverty rate in 2019 was the city’s lowest in more than a decade and below what it was in 2007, before the last major economic downturn.
Detroit’s employment recovery from COVID is exceeding expectations, according to the University of Michigan Economic Forecast. The city is making significant progress in its recovery from the COVID pandemic. According to a new economic forecast released by UofM, “Detroit’s unemployment rate has declined more rapidly than we anticipated last year.” The City released its Economic Outlook for Detroit through 2026, in collaboration with the University of Michigan, which examines employment, unemployment, and wage trends and projections.
The forecast predicts a stronger recovery in Detroit than statewide. This pace of recovery is supported by several large development projects, such as Stellantis’ Mack Avenue plant expansion, the Gordie Howe International Bridge project, and a new Amazon distribution center under construction at the former Michigan State Fairgrounds.
According to the study, which looks at data through June of 2021:
Unemployment among Detroiters has already recovered to approximately 3% below its pre-pandemic level.
Detroit’s unemployment rate, which spiked to more than 38% in May of 2020 and averaged 22% for a year, has declined dramatically.
By contrast, Detroit’s unemployment rate so far this year has averaged 9.9 percent and registered at 8.5 percent in June.
Detroit’s unemployment rate is projected to average 9.5 percent this year and to decline gradually to 6.9 percent by 2026.
Increasing Detroit Home Values
Since residential properties in Detroit still have price tags that vary significantly from other real estate markets, investors can find properties at lesser a price than other markets. However, within the city, these prices are increasing at a rapid pace (+20% YOY) and investors are encouraged to consider this market since the growth is expected to stay for a long time.
Detroit is an Affordable & Growing Housing Market
While the general rates of the Detroit real estate market are increasing, buying a property here is still more affordable than in other competitive markets. Even though housing prices in Detroit are rising, among large cities, Detroit is still pretty affordable. There are an estimated 500,000 rental units in the Detroit-Warren-Dearborn metro area that are affordable to someone making up to 60% of the area median income, according to an analysis of 2019 American Community Survey data. Investing in the Detroit real estate market today will get potential owners a range of properties at cheaper rates and they can either rent them out for improved cash flow or sell them whenever the market is soaring high.
Detroit Rental Market
Those looking for investing in rental properties to improve their cash flows can confidently consider Detroit real estate market for both housing and commercial properties. Although Detroit’s rent is affordable compared to other big cities, rent has gone up within the city over the past few years. Affordability ranked as the top factor in renters deciding to move, with job opportunities coming in second. This is one of the main reasons that many residents who had previously moved away from the city for better prospects are coming back and restoring their properties to get the advantage of increased rental rates.
Construction has been booming in Detroit these past couple of years. A majority of that construction has been in the Detroit housing market, and even more so rentals. A report from RentCafe.com showed the metro areas around the country building the most apartments, and while metro Detroit is pretty far down the list, but showing a steep increase from last year. 175% increase, to be exact, adding 1,615 new rentals to the market in 2017. Of the new rentals available, 785 are in the city. The new developments along the Riverfront and Lafayette Park open this year, specifically Orleans Landing and DuCharme Place.
The Zumper Detroit Metro Area Report analyzed active listings in August 2021 across 5 metro cities to show the most and least expensive cities and cities with the fastest-growing rents. The Michigan one-bedroom median rent was $931 last month. Ann Arbor was the most expensive city with one-bedrooms priced at $1,230 while Detroit was the most affordable city with one-bedrooms priced at $850.
The Fastest Growing Cities in Detroit Metro Area For Rents (Y/Y%)
Detroit had the fastest-growing rent, up 14.9% since this time last year.
Novi saw rent climb 14.7%, making it second.
Ypsilanti was third with rent increasing 4.7%.
The Fastest Growing Cities in Detroit Metro Area For Rents (M/M%)
Detroit had the largest monthly rental growth rate, up 4.9%.
Source: Zumper
Thriving Detroit Downtown
Owing to rapid growth in the demographics of Detroit in recent years, its downtown is also seeing significant development and has improved the quality of life for the residents of this city in Michigan. In the central portions of Detroit, the population of young professionals, artists, and other transplants is growing and retail is expanding. This dynamic is luring additional new residents, and former residents returning from other cities to the city’s Downtown along with the revitalized Midtown and New Center areas. There are popular eateries, sports teams with significant fan bases, regular concerts, and a generally happening nightlife.
The same could not be said for this city a few years ago and now it attracts several businesses and consequently, families that choose to live here. Many large corporations already have their presence in Detroit and many more businesses are being attracted to the city owing to its fast growth. This growth directly translates to increased jobs in the city, which also means more demand for residential properties. Keeping its current growth in view, Detroit real estate market is also a budding prospect for entrepreneurs who are looking for affordable rents and properties in growing markets.
Tourism In Detroit
Because of its unique culture, distinctive architecture, and revitalization and urban renewal efforts in the 21st century, Detroit has enjoyed increased prominence as a tourist destination in recent years. The New York Times listed Detroit as the 9th-best destination in its list of 52 Places to Go in 2017, while travel guide publisher Lonely Planet named Detroit the second-best city in the world to visit in 2018.
Metropolitan Detroit is a hub for entertainment options where many festivals are organized regularly, including musical shows and cruises, and has a wide range of hotels to choose from. Other tourist attractions include parks and museums which tourists frequent all year round. Owing to its many tourist attractions, the city constantly needs short-term and affordable residential options.
Detroit Government Initiatives
The government of Detroit has also been playing an important role when it comes to the development of the real estate market in the city. Developing parks and green zones around the city and improving the urban quality of life in the suburbs and all over the city. This is another reason for the rapid development of the Detroit real estate market.
Generally, Detroit is a city home to people from various walks of life coming from a range of financial and economic categories. This is a healthy environment for families and businesses to flourish in as it offers a balance of both modernity and tradition. Detroit’s real estate market holds a high value since it offers a well-rounded lifestyle for people who choose to reside in or move back here.
Education
Detroit is home to several institutions of higher learning including Wayne State University, a national research university with medical and law schools in the Midtown area offering hundreds of academic degrees and programs. The University of Detroit Mercy, located in Northwest Detroit in the University District offers more than a hundred academic degrees and programs of study including business, dentistry, law, engineering, architecture, nursing, and allied health professions.
The University of Detroit Mercy School of Law is located Downtown across from the Renaissance Center. With about 66,000 public school students (2011–12), the Detroit Public Schools (DPS) district is the largest school district in Michigan. Detroit has an additional 56,000 charter school students for a combined enrollment of about 122,000 students.
Health
Within the city of Detroit, there are over a dozen major hospitals which include the Detroit Medical Center (DMC), Henry Ford Health System, St. John Health System, and the John D. Dingell VA Medical Center. DMC is the largest private employer in the City of Detroit. The center is staffed by physicians from the Wayne State University School of Medicine, the largest single-campus medical school in the United States, and the United States’ fourth largest medical school overall. In 2011, Detroit Medical Center and Henry Ford Health System substantially increased investments in medical research facilities and hospitals in the city’s Midtown and New Center.
Transportation
With its proximity to Canada and its facilities, ports, major highways, rail connections, and international airports, Detroit is an important transportation hub. The Ambassador Bridge in Detroit is the single busiest border crossing in North America, carrying 27% of the total trade between the U.S. and Canada. Mass transit in the region is provided by bus services.
The Detroit Department of Transportation (DDOT) provides service to the outer edges of the city. From there, the Suburban Mobility Authority for Regional Transportation (SMART) provides service to the suburbs and the city with SMART’s FAST service. FAST is a new service powered by SMART, which offers limited stops and connects the suburbs to downtown quickly and easily.
Summary
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
Another good market to choose for investment is Savannah, GA. The Savannah area is evolving from a small town to a regional services hub with a diversified economy. It is never going to be a booming metropolis like Atlanta, but that won’t prevent it from being a great real estate investment. Many people are moving here for the ideal balance between the small-town feel and great amenities like a world-class hospital and international airport. The Savannah housing market is seeing significant appreciation due to strong demand and slower-growing inventory. Savannah home values have gone up 17.1% over the past year and are projected to continue to increase over the next twelve months.
The other good place to invest in real estate is Chico, CA. The Chico real estate market provides strong rental returns, a favorable legal and tax climate, and near-certain and significant property appreciation. These are among a few of the reasons to consider Chico real estate investment over “hotter” real estate markets due for a correction. The Chico real estate market is affordable when you compare it to the rest of California. The typical value of homes in Chico is $444,278.
Chico home values have gone up 14.2% over the past year. In August 2021, Chico home prices were up 5.5% compared to last year, selling for a median price of $445K (source: Redfin). On average, homes in Chico sell after 19 days on the market compared to 20 days last year. Many homes get multiple offers, some with waived contingencies.
Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
References
https://gmaronline.com/resource-library
https://www.mirealtors.com/housing-statistics
https://www.zillow.com/detroit-warren-dearborn-mi/home-values/
https://www.redfin.com/state/Michigan/housing-market/
http://www.freddiemac.com/research/indices/house-price-index.page
https://www.realtor.com/realestateandhomes-search/Wayne-County_MI/overview
https://www.neighborhoodscout.com/mi/detroit/real-estate
https://www.pioneerhomesus.com/why-detroit
https://en.wikipedia.org/wiki/Detroit
https://www.biggerpockets.com/renewsblog/detroit-real-estate-market
https://www.verticalrent.com/entry/7-reasons-why-the-detroit-real-estate-market-is-heating-back-up
https://detroitmi.gov/news/uofm-economic-forecast-shows-detroits-employment-recovery-covid-exceeding-expectations
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