When people think of Detroit real estate, they typically think of homes that have been abandoned and foreclosed. They picture a city that has seen better days, and for a long time, that was an accurate depiction.
Things are changing, though. While the city is still a long way from its Motor City days, it has seen a real estate resurgence that is getting people all over the world excited.
To put it simply, the Detroit real estate market is heating up, and it should not be ignored.
Just how hot is the market in Detroit? In August 2017, Detroit-Warren-Dearborn came in fifth place on the Market Hotness Index. This index is published by Realtor.com and measures 300 metros around the United States. In the prior month, the metro had been heating up, but by the time August rolled around, it was “Very Hot.”
1. The Road to “Very Hot”
Just how did Detroit manage to climb the list on the Market Hotness Index? It comes down to a simple equation that includes pageviews on Realtor.com and the number of days it takes listings to sell. As most real estate professionals know, hot markets don’t let property languish for very long. People are excited to snatch the property up, and that’s exactly what’s going on in Detroit.
Detroit heated up quite a bit in August, with a median listing time of 39 days. Compare that to the national average of 66, and it’s easy to see why the metro is so hot. Add in the fact that it received double the pageviews on Realtor.com when compared to the national average, and it’s no secret that this is one of the hottest markets around.
By looking at the data, it’s easy to see that people are interested in Detroit real estate, and once a property goes on the market, it is snatched up quickly. It’s a great seller’s market, and people are netting a nice profit on their real estate.
2. Prices on the Rise in the Motor City
As most people know, when a market heats up, prices go up, as well, and that’s exactly what’s happened in Detroit. Real estate prices are trending up in the Motor City, but that hasn’t cooled interest.
It wasn’t that long ago that Detroit homes were going for mere pennies on the dollar. At that time, no one knew when the Detroit real estate market would recover. In fact, people weren’t even sure if it would.
So much can change in a few years, though.
Condos have really changed the real estate game in Detroit. The prices are steadily rising, and both developers and investors are getting in on the game as quickly as they can. With interest from both parties, the demand is outpacing the supply by a great deal, which has led to the price increase.
Savvy investors are turning over condos they purchased in Corktown, Rivertown, and Islandview for a hefty profit, and new investors are snatching them up in the hopes of turning the same profit down the road.
All signs point to the likelihood that these investors will have a nice payoff in the future, as well. Prices have gone up by about 10 percent in 2017 alone, and that climb is expected to continue well into the future. That means that condos are more expensive than they’ve been in the past, but the prices should continue to go up more and more, netting people a nice profit when they finally decide to unload their investment properties.
This trend means that real estate should remain hot for years to come. As long as investors can expect a solid return on investment, they will maintain interest in the city. That interest could revitalize the city as a whole, so it’s great news for Detroit. Investors aren’t the only ones who win. The city wins, as well.
3. New Condos on the Horizon
Investors who’ve missed their chances to snatch up condos can be comforted by the fact that new condos are on the horizon. Dozens of condos are expected to open up in late 2017 and early 2018, giving investors yet another chance to cash in.
Just don’t expect competition and prices to go down when these condos become available. Competition is expected to remain fierce, and the new condos won’t fix the supply and demand issue. That means investors have to go all out to secure the real estate if they’re interested. They’ll need to act quickly, and they’ll also need to be willing to pay a premium to own real estate in Detroit. Of course, that investment might net them a huge profit down the road, so those who have the extra income will likely be rewarded. That’s why so many people have their eyes on these new condos. They probably won’t stay on the market for long.
4. Expats Invest in Their Home City
Seasoned real estate investors aren’t the only ones snatching up property in the hot market. Expats are shopping for real estate in their former home city, as well.
These investments can be traced to the Detroit Homecoming event. This event is geared toward Detroit expats. Through panel discusses, speeches, and more, the Detroit Homecoming reconnects expats to their hometown. It also provides them with opportunities to help Detroit thrive.
The Detroit Homecoming event has introduced people to real estate investment opportunities over the years. This is done in an effort to revitalize the city and restore it to its former Motor City glory.
Detroit expats have invested in residential and commercial properties. They have even invested in vacant land. They’ve managed to grab cheap foreclosures and other properties, and they’ve played a significant role in the real estate boom. Not only have their investments paid off, they have added jobs to the city by hiring people to renovate the properties.
This is another trend that isn’t expected to go away anytime soon. Expats have enjoyed a great deal of success with their investments, and many are looking for new ways to make their money work for them. This has added to the competitive nature of the real estate market.
5. Major Investor Heads to Detroit
With so much going on in Detroit real estate, it shouldn’t come as a surprise that the city has generated the interest of one of the most successful investors in the world. Berkshire Hathaway HomeServices, which is a division of Warren Buffet’s Berkshire Hathaway Inc., has descended on Detroit. This real estate brokerage franchise network has a specific interest in the city’s luxury real estate market. It took Loft Warehouse into its brokerage franchise network in an effort to promote luxury real estate listings to international audiences.
Loft Warehouse won’t have to change its business model too much to attract international clients. A third of the brokerage’s sales already come from buyers out of state, so it had already expanded its scope past Michigan.
It shouldn’t come as a surprise that Loft Warehouse goes for out-of-state clients. It lists high-end luxury real estate that is outside of the price range for most Detroit homeowners. Keep in mind that the median income for a family of four in the Motor City is just $26,000, so spending half a million dollars on a condo is out of the question.
That’s close to the going price for the cheapest unit for a 12-unit complex in Midtown. The Loft Warehouse is selling units for the new complex, and investors have to plop down $439,000 for the cheapest one. They can spend quite a bit more if they want something even more luxurious.
Fortunately, Buffet’s company is going to help Loft Warehouse by giving it access to developers, investors, and more on both the national and international level. This will likely make the real estate market get even hotter in Detroit. The luxury market will likely grow even more as international investors descend on Detroit. This could be the start of something great for the city.
6. Real Estate Boom Means Jobs for a Beleaguered City
Detroit has struggled with unemployment for years. The city had an unemployment rate of 28.4 percent in June 2009. The number fell from there, but it remained much higher than the city wanted. It managed to cut the unemployment rate to 8.4 percent in April 2017, which is just a bit more than it was in May 2001, right before the dot-com bubble burst.
With billions of dollars of investment capital, population losses have slowed and unemployment numbers are dwindling. New jobs are on the horizon, as well, so the number is expected to go down even more. That is great news for the city.
Dan Gilbert, a developer and founder of Quicken Loans, has plans to transform Detroit’s skyline. His plan includes bringing as many as 24,000 jobs to Detroit. Fifteen-thousand of the jobs will be temporary construction jobs, while 9,000 will be permanent.
The project includes restoring Brook Tower, adding a new skyscraper, building a 35-story tower, and adding an addition to One Campus Martius. The project will take around five years to complete and will create 3.21 million square feet of residential, retail, and office space. It will also bring in 2,000 new parking spaces.
This is just one example of how the real estate market is also revitalizing the city’s economy. New construction means more jobs, and more jobs means more money infused into the economy. This just might be how Detroit becomes a major player once again.
7. A Market Primed for Fraud
When real estate markets get hot, fraudsters tend to come in and look for marks, and Detroit has hardly been the exception to the rule. The city has seen some real estate schemers make their mark.
One scam involved false deeds. Buyers thought they’d found amazing deals in Detroit. They were able to buy property for $1,000 to $5,000. Many of the buyers intended to fix up the properties and live in them.
They were presented with fake deeds and made payments to the fraudsters. Over time, they discovered that the deeds were fake and they weren’t the actual homeowners.
The fraudsters also scammed some of the actual homeowners, telling them they would have to pay them money to recover their property.
This is one example of the fraud that’s going on in Detroit. Anytime there is a hot market, fraudsters will try to cash in on it, so buyers need to be savvy when purchasing property. They should go with trusted compares to ensure they don’t get scammed. Otherwise, they could end up losing serious money.
Want in on Detroit Real Estate? Be Smart
Investors from all over are descending on Detroit real estate, and they are urged to proceed with caution. Many investors will buy real estate and rent it out until they are ready to sell. Getting bad tenants is a quick and easy way to lose money on an investment. They can get in over their heads if bad tenants occupy the property.
Fortunately, there is an easy solution. Tools like tenant background screenings, tenant credit reports, and online rent collection ensure that landlords find quality tenants and collect the rent on a monthly basis. Landlords are encouraged to use these tools to maximize their investments. These tools protect landlords and help them maximize their profits in the long run.
It’s Going to Stay Hot in Detroit
Real estate investors know one thing: Detroit is likely going to stay hot for a long time. The city has been revitalized, and the economy is growing. The Detroit of the old days is trying to make a comeback, and the market might make that happen.
Those who want to take advantage of this are encouraged to act fast, while still doing their homework. Properties don’t stay on the market for long, so waiting might be a mistake. At the same time, they need to do their research to make sure they pick an investment property that will work for them.
About the author
Matt Angerer is the Founder and President of VerticalRent. He enjoys writing on a variety of topics that help Landlords, Property Managers, and Renters across America. He is particularly interested in helping renters understand their local marketplace, pick the best places to live, and find an awesome roommate. Since 2011, VerticalRent has grown to service over 100,000 landlords and renters across America.