Understanding prime real estate market location is critical whether you are a seasoned investor or just establishing your real estate investment business. Detroit has shown itself as a significant player amidst the current real estate storm, witnessing an overall 17.1% increase in home values with a forecasted growth of 12.5% over the next 12 months. Iconically known as The Motor City and affectionately referred to as the Home of Motown, it is no surprise that the city is experiencing so much growth.
Aside from the historical ties that the city has, the reemergence of its real estate market calls for many observances when considering acquiring real estate assets. This blog will dive deep into analyzing the Detroit housing market, elaborating on the trends, demographic, and other hard-core statistics.
Like many other markets, the Detroit housing market benefited from the pandemic boom. However, one particular fact that made it more favorable was that although the Detroit housing market is witnessing a rapid incline in housing values and prices, it remains one of the most affordable markets. One among many reasons why this market has been a keen pick among investors. Other factors working for the greater good include the economic sectors responsible for attracting buyers, including automotive, health, tech, and finance.
In addition to the wins of the growing market, how will the Detroit housing market stack up in your portfolio? Read on to learn more.
All links will provide you the option to dive deeper into the data and see the trends over time for yourself!
Housing Market Analysis And Inventory
Detroit’s housing market has an increased median home price from $214,900 to $234,900. Considering the growth and affordability of the market, this shows as a great sign to buy or sell in the Detroit Housing market.
The Detroit housing market has been experiencing a yo-yo effect since 2017. The up and down trend finally ceased around 2020, when it saw a new emergence of demand. Like much of the housing inventory, the market has struggled a bit with outpacing the buying demand. There has been a small bounceback within the inventory, but not quite enough to restore the stabilization to the available stock. The Detroit market experienced its lowest housing availability in February 2022, with a known number of listings at 4,569.
Detroit’s market is sizzling, and as a result, it is necessary to maintain focus and implement a strategy when submitting offers on available listings. The demand has outpaced the supply, making the market competitive.
Housing Market Private Housing Units
Detroit’s new private housing market was consistently up and down before the unfortunate 2008 housing crash. The highly unprecedented event took a toll on the market, and it never quite seems to recover, at least to its original levels of new private housing production. The production rise was relatively minimal, spiking sporadically and finally peaking in 2018. There doesn’t seem to be much assistance with the pandemic effects, considering the unprecedented challenges builders are experiencing in terms of labor and material shortages.
Value
Consistent with many markets across the nation, the Detroit housing market has witnessed a stark increase in home value. The city of Detroit has seen a nearly 40% increase in home value, including an uptick in the median home rate. The metro area has as well experienced a positive upturn.
If you’re interested in having a particular market analyzed for your real estate investing needs, our Dynamic.RE team serves as a reliable source for market deep dives, including trends and overall easily digestible information. Schedule a call with us and get the answers you’re looking for today!
Rental Rates And Short Term Rentals
The graph below shows a heatmap for rental income in Detroit, see what’s hot and what’s not before you invest.
The Detroit Housing Market seems to have still the rental market working relatively well, mainly when speaking about the rental rate. Over the past 12 months, the national rental rate has experienced a whopping increase to the tune of 17.1 percent, according to the apartment rental marketplace, Apartment List. Detroit, like its housing market, has managed to maintain affordability in this hot market. The rental rates had an increase of a little over 8%.
As for the short-term rental sector, there appears to be a steady market for it as well. According to the 2020 census, the number of occupied housing units is 52% renter occupied. The pandemic increased the demand for traveling professionals, such as nurses who require short-term stay solutions. Additionally, post-pandemic has also provoked a spike in the number of individuals traveling again who require short-term stay solutions.
Looking into AirDNA data, there are 1,022 active rentals in the area with 81% being entire home spaces for rent. The average daily rate (ADR) is $167, a 50% occupancy rate, and revenue for hosts averages $1,889/month. The rental sizes are predominately 1 bedroom stays with 2, 3, studio, 4 and 5+ bedroom stays following accordingly. The rental listings grew in 2020 but the count has remained roughly the same since the second quarter of 2021.
Demographics
Detroit, Michigan, has a relatively large population of over 600,000 constituents, with a median age of 34 years old with an average household income of just under 33,000 per year. The unemployment rate suffered a considerable blow in 2020 but has since begun to recover. The [number of available positions] (https://fred.stlouisfed.org/series/IHLCHG19820)for employment has been on the rise. The rise in open positions compared to the rate at which the number of unemployed individuals declines indicates that the return of jobs will serve as beneficial to the market.
Migration Map
Migration patterns can be seen below showing where people appear to be originating from as they migrate, or consider migrating, into Detroit.
Sustainability
If you’re wondering about the sustainability scene in Detroit you can check out their city page which outlines the most recently adopted agenda the city is taking on inclusive of their framework, implementation plans, goals, actions, and accountability approach. A more general Detroit sustainability page can be found here which highlights the city’s sustainability department and their focus on regreening with their 10,000 UP Tree Initiative which helps plant residential trees in front of homes, proper waste disposal with information on recycling, a newsletter sign up to stay up to date, events to attend, and several related and helpful articles to learn more!
Average Price: Electricity per Kilowatt-Hour
Detroit has had a stark increase in electricity usage. Over the past few decades, the city has been on a steady incline in kilowatt usage per dollar of electricity. See the trends here. Aiming to combat electricity usage could directly correlate to Detroit’s Office of Sustainability launch kicking off its’ first Sustainability Action Agenda in 2019. The initiative has stayed the course in developing its pursuit of a thriving and more sustainable city.
Average Price: Gasoline Regular Unleaded
The nation has been experiencing record-shattering gasoline prices. It is pretty safe to say that the unprecedented topsy turvy nature of the gasoline rates correlates, as well, as many other economic factors, with the 2020 pandemic. The national gasoline rate for regular gas is 4.21.
In April 2020, Detroit had a gasoline rate of 1.49 per gallon, very reminiscent of the gasoline rates in Detroit in 2005. This is a vast difference compared to their current rate of 3.89 per gallon. See the trends here.
Conclusion
The Detroit housing market is sizzling. It’s a perfect spot for individuals who may have sold in a more profitable market and looking for the opportunity to diversify or add to their portfolio. The market’s affordability allows it to be a great place where new investors can start in the market, get a few assets under their belt, and begin to grow equity.
The increase in available positions shows an opportunity for the economic upturn, particularly after the massive increase but now stabilizing unemployment rate following the pandemic.
Analyzing the trends of the Detroit housing market helps maneuver and understand the data available, giving you the best shot at making an educated decision. Once you get the overview, a more detailed look at places may be your next step! You can evaluate any property you’re interested in and get your investment portfolio going today. Remember, it doesn’t take an expert to invest, spend some time looking into the numbers and you’ll be making data-backed decisions providing you with returns you can count on in no time.
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