In Detroit's current real estate landscape, it's safe to say that the balance tips slightly in favor of sellers. With home prices on the rise and properties selling faster than in previous years, sellers have the advantage of attracting competitive offers. However, buyers can still find opportunities to negotiate, especially considering that some homes sell below the list price.
The Detroit housing market has also emerged as a surprising frontrunner, outpacing even the vibrant Miami market, according to the report from CoreLogic. In a noteworthy turn of events, Detroit, once synonymous with the boom and bust of the auto industry, has witnessed the highest year-over-year home price increase among the 20 metro areas tracked by CoreLogic as of November 2023, recording an impressive surge of 8.7%.
One striking aspect of Detroit's housing market is its continued status as one of the most affordable large metros in the United States. Despite the impressive surge in home prices, Detroit maintains its reputation for affordability, offering homebuyers an attractive proposition in comparison to other major cities.
How is the Detroit housing market doing currently?
Detroit, often referred to as the Motor City, has faced significant challenges due to the decline of the auto industry. However, the recent housing market data paints a different picture, showcasing a remarkable resurgence. Despite its industrial setbacks, Detroit has defied expectations and experienced a robust 8.7% increase in home prices, outpacing the growth in Miami, which posted a respectable 8.3% year-over-year advance.
Investing in the Detroit housing market has been a source of contention for investors for a long time. 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.
It's noteworthy that while Detroit has undergone economic challenges, the housing market seems to be a beacon of resilience and growth. The following factors contribute to the city's housing market dynamics:
- Industrial Evolution: Despite the historical ties to the auto industry, Detroit has shown adaptability with a diversified industrial landscape, contributing to economic stability.
- Investor Confidence: The resurgence in home prices indicates growing investor confidence in Detroit's real estate market, recognizing its potential for long-term growth.
- Affordability: Detroit's affordability, coupled with the upward trajectory in home prices, positions it as an attractive destination for homebuyers and investors alike.
Latest Housing Report on Detroit
How is the Housing Market Doing Currently?
The latest housing report on Detroit paints a picture of resilience and growth in the city's real estate landscape. According to Redfin, in February 2024, home prices surged by an impressive 12.5% compared to the previous year, reaching a median price of $81,000. This upward trend indicates a robust market, with homes fetching better prices than ever before. Moreover, the average time homes spend on the market has decreased, with properties selling after 47 days, down from 51 days last year. This swift turnaround signifies a heightened demand for housing in the Motor City.
How Competitive is the Detroit Housing Market?
Detroit's real estate market is showing signs of competitiveness, albeit with its own unique dynamics. The median sale price in Detroit stands at 81% below the national average, making it an attractive destination for homebuyers seeking affordability without compromising on quality. Homes in Detroit typically sell in 49 days, indicating a moderately competitive environment. Interestingly, some properties receive multiple offers, showcasing the demand for desirable homes in the city.
Are There Enough Homes for Sale to Meet Buyer Demand?
While the market in Detroit is competitive, there are homes available to meet buyer demand. On average, homes sell for about 5% below the list price, indicating a balance between supply and demand. However, hot homes can command prices closer to the list price and go pending in as little as 18 days, highlighting the appeal of certain properties. Additionally, the surge in homes sold above the list price, which increased by 5.1 percentage points year-over-year, underscores the competition among buyers vying for quality properties.
What is the Future Market Outlook for Detroit?
Looking ahead, the future market outlook for Detroit appears promising. The sustained growth in home prices and the decreasing time homes spend on the market indicate a healthy real estate environment. Moreover, the migration and relocation trends suggest that a significant majority, 79%, of homebuyers are looking to stay within the metropolitan area, reflecting confidence in Detroit's long-term prospects. With a steady influx of buyers and investors, the market is poised for continued expansion and development.
ALSO READ: Michigan Housing Market Forecast
Detroit Housing Market Forecast for 2024 and 2025
According to Zillow, the Detroit-Warren-Dearborn housing market portrays a picture of resilience and growth. As of February 29, 2024, the average home value stands at $240,536, reflecting a notable increase of 5.6% over the past year. Homes in this market typically go pending in approximately 17 days, indicating a robust demand.
Understanding Key Metrics
- For Sale Inventory: As of February 29, 2024, there are 9,872 properties listed for sale in the Detroit-Warren-Dearborn area, showcasing a diverse range of options for potential buyers.
- New Listings: In February 2024, 3,086 new listings entered the market, adding to its vibrancy and providing fresh opportunities for buyers.
- Median Sale to List Ratio: This metric, calculated as 0.994 as of January 31, 2024, indicates the relationship between the final sale price of a property and its initial listing price. A ratio close to 1 suggests a balanced market where properties are selling close to their listed prices.
- Median Sale Price: As of January 31, 2024, the median sale price in the Detroit-Warren-Dearborn area is $223,483, reflecting the midpoint of all sales recorded during that period.
- Median List Price: With a median list price of $211,633 as of February 29, 2024, sellers in this market are positioning their properties competitively to attract potential buyers.
- Percent of Sales Over/Under List Price: These percentages, recorded as 32.9% and 51.5% respectively for sales over and under list price as of January 31, 2024, offer insights into the negotiation dynamics between buyers and sellers.
The Detroit-Warren-Dearborn metropolitan statistical area (MSA) encompasses several counties, including Wayne, Oakland, and Macomb. This MSA is significant in size and diversity, offering a wide array of housing options to cater to various preferences and budgets.
Are Home Prices Dropping in Detroit?
As of the latest data available, there are no indications of home prices dropping in the Detroit-Warren-Dearborn housing market. On the contrary, the average home value has experienced a 5.6% increase over the past year, suggesting a trend of appreciation rather than depreciation.
The current dynamics of the Detroit-Warren-Dearborn housing market suggest that it leans towards being a seller's market. With a relatively low inventory of available homes and a high demand from buyers, sellers have the upper hand in negotiations. This trend is reflected in the percentage of sales over list price, indicating a competitive environment where buyers may need to act quickly and offer competitive bids to secure properties.
Will the Detroit Housing Market Crash?
While no one can predict the future with certainty, there are currently no signs pointing to an imminent crash in the Detroit-Warren-Dearborn housing market. The market exhibits stability and resilience, supported by factors such as steady demand, favorable mortgage rates, and economic growth in the region. However, it's crucial to remain vigilant and adapt to any changes in market conditions.
Is Now a Good Time to Buy a House in Detroit?
For prospective homebuyers, the decision to buy a house depends on various factors, including personal circumstances, financial readiness, and market conditions. In the Detroit-Warren-Dearborn area, the current market favors sellers, indicating a competitive landscape for buyers. However, with mortgage rates remaining relatively low and the potential for property appreciation, now could still be a favorable time to enter the market for those who are prepared to act decisively and navigate the competitive environment.
Here are the best neighborhoods to invest in Detroit rentals because they have the highest appreciation rates since 2000 (List by Neigborhoodscout.com).
- Rosa Parks Southeast
- Corktown
- Butzel
- West Village
- Rosa Parks East
- Mcdougall Hunt West
- Mcdougall Hunt South
- Jeffries
- University
- Condon East
Detroit Real Estate Investment Overview
Detroit, Michigan is a city with a rich history, known for its role in the automobile industry and its contributions to music, art, and culture. In recent years, Detroit's real estate market has been on the upswing, making it an attractive destination for real estate investors looking for long-term returns. In this overview, we will explore the current state of the Detroit real estate market and provide five compelling reasons to invest in this market for the long term.
Detroit, known for its historical significance and urban revitalization efforts, presents a complex yet potentially lucrative landscape for real estate investors. As of the latest available data, the average home value in the Detroit metro stands at $238,284, reflecting an increase of 4% over the past year. This market trend may offer opportunities for value-oriented investors seeking properties with growth potential.
Top Reasons to Invest in Detroit Real Estate for the Long Term:
- Affordable Prices: Detroit's real estate market offers some of the lowest prices in the country, making it an ideal destination for investors looking to buy low and sell high.
- Strong Rental Market: Detroit's rental market is thriving, with a high demand for affordable housing. This makes it an ideal market for buy-and-hold investors who are looking for passive income streams.
- Revitalization Efforts: Detroit has undergone a significant transformation in recent years, with major revitalization efforts taking place throughout the city. These efforts have attracted new residents, businesses, and investment to the area, driving up property values and creating new opportunities for investors.
- Job Growth: Detroit's economy is on the upswing, with job growth in a number of key sectors, including technology, healthcare, and manufacturing. This is driving demand for housing and creating new opportunities for investors.
- Pro-Investor Policies: Detroit has a number of pro-investor policies in place, including tax incentives and other programs designed to encourage investment in the city's real estate market. This makes it an attractive destination for investors who are looking for long-term returns.
- Thriving Detroit Downtown: Over the past decade, the downtown area of Detroit has undergone a major transformation and has become a hub of economic and cultural activity. The downtown area is home to several major corporations, including General Motors, Quicken Loans, and Ally Financial, as well as numerous startups and small businesses. The thriving downtown area has also led to an increase in demand for housing in the city. As more and more people move to Detroit to take advantage of job opportunities and the city's vibrant culture, the demand for housing in the downtown area has increased. This has led to an increase in property values and rental rates in the area. Investing in real estate in the downtown area of Detroit can provide a great opportunity for long-term growth and rental income. Properties in the area are likely to appreciate in value over time as the area continues to grow and attract more businesses and residents. Additionally, rental rates in the area are likely to remain high due to the high demand for housing in the downtown area.
- Detroit Government Initiatives: In recent years, the city's government has taken several initiatives to revitalize Detroit and attract more businesses and residents to the city. These initiatives have included tax incentives, redevelopment projects, and community outreach programs. One of the most significant government initiatives in Detroit is the Strategic Neighborhood Fund (SNF), which was launched in 2016. The SNF is a public-private partnership that provides funding for neighborhood revitalization projects, such as park improvements, streetscape enhancements, and commercial corridor redevelopment. The program has invested over $40 million in Detroit neighborhoods and has helped to attract new businesses and residents to the city. Another government initiative that has had a positive impact on Detroit's real estate market is the Neighborhood Enterprise Zone (NEZ) program. The NEZ program provides tax incentives to homeowners and businesses in designated areas of the city. The incentives include a freeze on property taxes for up to 15 years and a reduction in the taxable value of the property. This has made it more affordable for residents and business owners to own property in Detroit, which has led to increased demand for real estate in the city. The Detroit Land Bank Authority (DLBA) is also a government agency that has played a key role in revitalizing the city's real estate market. The DLBA is responsible for acquiring and disposing of tax-foreclosed properties in the city. The agency has made it easier for residents and investors to acquire property in Detroit, which has helped to stimulate the real estate market and drive up property values.
Detroit Rental Market Trends
Detroit's rental market has seen significant growth in recent years, with both short-term and long-term rental options becoming increasingly popular. This growth can be attributed to several factors, including the city's revitalization efforts, an increase in job opportunities, and a growing population. As a result, Detroit's rental market has become an attractive investment opportunity for real estate investors.
One of the main reasons for the growth of the rental market in Detroit is the city's revitalization efforts. In recent years, Detroit has undergone a significant transformation, with abandoned buildings and neighborhoods being restored and renovated. As a result, the city's population has grown, and job opportunities have increased. These changes have created a demand for housing, including rental properties, leading to an increase in rental rates.
Another reason for the growth of the rental market in Detroit is the city's growing population. According to the U.S. Census Bureau, the population of Detroit increased by over 4% between 2010 and 2020. This growth has led to an increased demand for housing, and rental properties have become a popular choice for many residents.
The short-term rental market has also seen significant growth in Detroit in recent years. With the rise of platforms like Airbnb, short-term rentals have become an increasingly popular choice for travelers. In Detroit, short-term rentals have become an attractive option for tourists and business travelers, with many properties located in desirable neighborhoods close to popular attractions.
Investing in the Detroit rental market offers several advantages for long-term investors. One advantage is the potential for long-term appreciation in property values. As the city continues to grow and improve, property values are expected to increase, leading to a significant return on investment for those who invest in rental properties now.
Another advantage of investing in the Detroit rental market is the relatively low cost of entry compared to other markets. With lower prices for rental properties, investors can purchase properties at a lower cost, increasing their potential return on investment.
Additionally, the high demand for rental properties in Detroit offers the potential for a consistent stream of rental income. As more people move to the city and job opportunities continue to grow, the demand for rental properties is likely to increase, providing a steady source of income for investors.
The Zumper Detroit Metro Area Report analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Michigan one bedroom median rent was $1,039 last month. Birmingham was the most expensive city with one bedrooms priced at $1,920 whereas Romulus was the most affordable city with one bedrooms priced at $820.
The Fastest Growing Cities in Detroit Metro Area For Rents (Y/Y%)
- Ann Arbor had the fastest growing rent, up 12.7% since this time last year.
- Southfield saw rent climb 8.8%, making it second.
- Warren was third with rent increasing 8%.
The Fastest Growing Cities in Detroit Metro Area For Rents (M/M%)
- Birmingham had the largest monthly growth rate, up 6.1%.
- Ann Arbor was second with rent increasing 6%.
- Southfield saw rent climb 6%, ranking as third.
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.
References:
- https://www.zillow.com/detroit-warren-dearborn-mi/home-values/
- https://www.zumper.com/blog/detroit-metro-report/
- https://www.redfin.com/state/Michigan/housing-market/
- https://www.realtor.com/realestateandhomes-search/Wayne-County_MI/overview
- https://www.neighborhoodscout.com/mi/detroit/real-estate
- https://gmaronline.com/resource-library
- https://www.mirealtors.com/housing-statistics
- https://detroitmi.gov/search?search=strategic+neighborhood+fund
- https://detroitmi.gov/search?search=neighborhood+enterprise+zone+%28nez%29+program