Detroit, Mich., has always been widely known for its sports teams, music and art. Once a popular and prosperous city, it has had its fair share of distress in the last couple of decades. With bankruptcy, violence and run-down businesses in its past, the Detroit real estate market has been hard to turn around. The city was trying to make a comeback when the pandemic hit. Now, it's ready to try again, and the possibilities are promising.
Current Detroit Market Conditions
- The median home and rental prices are on the rise.
- The number of households has increased by 9,900 year-over-year, making this the most households in the city in several years.
- Employment is on its way up, and unemployment is almost down to pre-pandemic numbers.
Buying a House in Detroit
Detroit Home Prices
Detroit median home value: $175,000
National average: $371,000
Home prices in Detroit have been on an upward trend over the last 5 years. Though still much less expensive than the national average, median home prices here have gone up almost $100,000 since 2016 and are continuing to rise. With an impressive 11.5% increase year-over-year, the national average is still much higher at a 22.4% increase. For Detroit, a once somewhat abandoned city, this increase is huge and could mean exciting things for its future comeback.
Detroit Housing Supply
The housing supply in Detroit is similar to that of most of the nation, with just a 1.3-month supply here compared to a 1.1-month supply nationally. Detroit’s housing supply is down almost 3 months in the last year and now is the lowest it has been in years. Nationally, supply dropped by almost 2 months year-over-year. So for Detroit, supply has dropped faster and is remaining low. This means that people are moving to this city and staying. Homes are being sold for more money, and competition is fierce. Buyers can expect higher-priced homes and fewer opportunities to buy in this market. Sellers can expect to sell their homes for higher prices than ever — and quickly.
Buying a Rental Property in Detroit
While home prices are on the rise, it’s no surprise that rental prices are, too. Both nationally and in Detroit, rental prices have risen about $300 since 2016. This is great news for real estate investors and the Detroit real estate market.
Detroit Rental Prices
Detroit median rental price: $1,300
National average: $1,704
Nationally, rental prices have seen an increase of 3% year-over-year. Detroit, however, has seen a whopping 8.3% increase. Most of the city’s increases have been in the last 2 years, and prices are still on an upward trend. With additional households coming in, employment opportunities rising and a booming housing market, it’s a great time to get into Detroit. With a promising outlook for this once-vibrant city, investors should keep this area on their list of cities with great investment potential.
Detroit Rental Vacancies
Detroit rental vacancy: 8.7%
National average: 6.8%
Although higher than the national average, Detroit rental vacancies are still low at 8.7%. It has seen an increase in vacancies of 2.5% since this time last year, but the rental market is pretty sporadic to begin with. It had its share of highs and lows in recent years but is at the highest percentage right now than it has been in the last 5 years. While the housing supply is down, this could simply mean that people are purchasing instead of renting. For investors looking for rental properties, there is always a risk of vacancies. However, in the future, there may be a shortage and a need for rentals. Being at a high point now, given past statistics, vacancies will be falling again soon.
Detroit foreclosure rate: 0.1%
National average: 0.3%
Detroit foreclosure rates are at an all-time low of 0.1%. They have dropped 0.1% from last year as well. Such a low foreclosure rate is great for the economy and Detroit’s real estate market. This means fewer abandoned and distressed homes and more people coming to the city and taking care of their homes. For investors, it’s hard to score a great deal like a foreclosure because there are so few, but it shows that this is a city to invest in because buyers want to be here and supply is low.
The most expensive area in Detroit is the 3rd Street and West Forest Avenue neighborhood. Median home prices in this neighborhood are $691,977 while rentals are just $881. Most residents in this urban spot rent their homes. These homes are small to mid-sized apartments in apartment complexes and high-rise buildings built in the 1930s and 1940s. Being the most expensive area in Detroit, the vacancy rate is high at 26.7%. This could be because of new construction not yet occupied, expensive housing or a recurring vacancy problem. Of the residents that do live in this walkable neighborhood, nearly half are single-person, low-income households. They are able to walk or bike to work. In addition, this neighborhood offers culturally diverse backgrounds and a variety of languages.
A suburb of Detroit to take note of is located at West Jefferson and Woodward avenues. Median home prices here are $346,542, and rentals are $2,084. The rentals in this neighborhood are more expensive than 95.9% of other areas in Detroit. For an investor, the lower-priced housing and higher-priced rental rates offer great potential for investment opportunities as most of the housing here is renter-occupied. It may be risky, however, with the rental vacancy rate at 13.7%. A unique trait of this neighborhood is the amount of studio, 1- and 2-bedroom housing. The neighborhood has a higher concentration of smaller housing than most areas of the United States. This is an upper-middle income neighborhood, with single people occupying almost 70% of these households. Most residents in this neighborhood have an advanced college degree and are employed in professional, executive and managerial positions.
Another suburb of Detroit is the West Mcnichols Road and Ashton Avenue area. Homes here are priced around $145,000, with rentals around $1,700. Made up of decent-sized, single-family homes with 3 to 5 bedrooms and small apartment complexes, this area has a 14.8% vacancy rate. This is considered a well-established neighborhood with buildings built from the 1940s to the 1970s. It is popular for its abundance of single-family, detached homes. There are far more here than in other parts of Detroit, which has primarily apartment complexes and high rises. Jobs in this upper-middle income area range from executives and professionals to manufacturing and fast-food workers.
Detroit Economic Condition
Big cities were hit hard by the pandemic. Especially cities like Detroit that already were struggling. As unemployment numbers rose to unimaginable levels, it was hard to see a positive outlook for the city’s revival. However, Detroit is trying to prove everyone wrong and is well on its way to recovery.
Detroit unemployment rate: 4.5%
National average: 6.1%
The unemployment rate in Detroit has hovered around 3.5% to 5.5% in recent years. It has come down to a decent rate — 4.5% — since a major spike in 2020 when it reached nearly 25%. Nationally, the unemployment rates spiked in 2020 as well, hitting a high of almost 15%. However, comparing where the 2 rates are now, Detroit has seen a major decrease and is now lower than the national levels. The rate spiked much higher and still dropped lower. This is impressive for the Detroit economy. It has seen a healthy increase in employment and is still working its way back up.
Detroit top Employers
Nicknamed the Motor City for its ties to the automotive industry and being Henry Ford’s old stomping grounds, the automotive industry is still the largest employer in Detroit today. Ford Motor Co. (NYSE: F), General Motors Co. (NYSE: GMC) and Fiat Chrysler Automotive Group NV (NYSE: FCA) are the top employers. They offer a myriad of job opportunities to residents of all different skill levels, ranging from manufacturing to management positions.
Several hospitals and healthcare facilities also offer plenty of jobs in the Detroit area. Henry Ford Health System, St. John Health System, Trinity Health and Beaumont Health are just a few of many in the city. Aside from automotive and healthcare opportunities, education is the next largest employer. Many jobs are held in the Detroit Public Schools as well as the University of Michigan.
The Bottom Line on the Detroit Real Estate Market
Detroit isn’t missing out on the boom most real estate markets in the country are experiencing. The number of households is up by 9,900, home and rental prices have increased greatly and employment is up 378,800 jobs year-over-year. These are all good things for the Detroit real estate market. If the real estate market keeps going this way, Detroit will be making its grand revival much sooner than expected.