Note: Our market forecast includes Detroit data and data from its surroundings, including Warren and Dearborn, Michigan.
Detroit is one of the largest cities in the Midwest. Second only to Chicago, it's Michigan’s biggest city, as well as the county seat for Wayne County. Notably, Detroit is also located on the Canadian border, a fact which has made it a key city for trade since its inception in 1701.
Today, however, Detroit is a diverse economic and cultural hub. Known colloquially as the “Motor City,” the automobile industry found its home in Detroit in the early 20th century. Today, a number of Fortune 500 companies reside in the area, including General Motors (NYSE: GM), Ford Motor (NYSE: F), and Penske Automotive Group (NYSE: PAG). In addition, the city is known for giving rise to Motown and techno music.
The state of the market
The Detroit housing market has long been a subject of debate among investors. In particular, in 2021, while it's clear that the area is still working to stave off some of the effects of the pandemic, other metrics are showing that the city is well on its way to recovery. Here are three current trends to consider before you add properties in the Motor City to your portfolio.
Detroit's rising home prices are still well below average
Like everywhere else, Detroit’s median home price is feeling the effects of the ongoing inventory shortage. Still, even though prices are up over 14% on a year-over-year basis, the median home price of $160,000 is well below the national average of $353,000, which gives investors a lot of wiggle room on their bottom line.
Rental vacancies are also up
Those who are thinking of following a buy-and-hold strategy may want to consider that rental vacancies are up to 8.7% as of March 2021. That figure is much higher than the current national average of 6.8%. While the increase in the vacancy rate doesn’t seem to be impacting rental rates yet, it may have an impact on your turnaround time and marketing efforts.
Detroit's financial health indicators are mixed
While the foreclosure rate is down in Detroit right now, that's likely due to the increase in pandemic-related assistance measures. Unfortunately, at the same time, mortgage delinquencies are up, along with unemployment, which suggests that many individuals in the area are still struggling financially.
Detroit housing demand indicators
All data and charts supplied by Housing Tides by EnergyLogic.
While Detroit’s housing demand indicators show that the city is still feeling some of the effects of the pandemic, by and large, they also create a positive outlook for investors.
Last year, unemployment was one of the areas where Detroit was hit hardest by the pandemic. At its peak in May 2020, the unemployment rate in the Motor City hit a staggering 24.8%, which was almost double the national average of 13.3%. However, since then, this metric has made a great recovery.
Per the latest statistics in March 2021, Detroit's unemployment rate has dropped to just 4.5%, noticeably lower than the current national average of 6%.