For the first time in decades, there are now more renters than homeowners in Detroit, and investors are racing to secure returns while they are still available.
Data from the US Census Bureau reveals that renters now make up 51.6 per cent of Motor City’s housing market, overtaking homeowners for the first time in years. Indeed, Detroit’s rate of homeownership has been declining for the last decade, partly due to foreclosures following the global financial crisis and partly fuelled by a more recent generational shift towards renting: across the US as a whole, homeownership has also declined in the last 10 years.
Analysis of data from the USA’s top rental markets (where homeownership rates are at their lowest), though, reveals one major difference between Detroit and other tenant-heavy cities: Detroit’s house prices are significantly lower. Cities such as San Francisco have seen workers priced out of the housing market, due to the Silicon Valley boom pushing up property values: the city has an average house price of $1,147,300, according to Zillow. In Newark City (New Jersey), where the homeownership rate is 21.7 per cent, house prices are an average of $231,900. In Detroit, homeownership is at a higher 49.4 per cent, but prices are at an average $38,200, according to Zillow.
The result is a buy-to-let market that has encouraged interest from overseas investors: Michigan was the third most popular state on TheMoveChannel.com in 2016, accounting for 1 in 7 enquiries about US property. The window, though, is closing, warn agents.
Mike Moodie, CEO of Global Investments Incorporated, comments: “I think that 5-7 years ago investors seen Detroit as a risky investment, especially with the bankruptcy application. Since this time, Detroit has come back and is stronger than ever making this a lot less riskier investment for people to make.”
The city’s economy has shown signs of reversing its fortunes, following that bankruptcy filing in 2013. General Motors has invested over $11 billion in the last two years to create or preserve jobs, the company said in a statement earlier this year. GM has also pledged a further $1 billion in US investment in 2017 to create a further 1,500 new jobs. In total, the company expects to create more than 5,000 new US jobs in the next few years.
Now, the city makes up 70 per cent of Global Investments’ sales, as buyers race to secure property before prices climb too high. According to Zillow, values have risen 12 per cent in the last 12 months.
“Prices are moving rapidly and good stock is getting harder for us to find, meaning that the window of opportunity to invest is slowly closing,” adds Moodie.
“Obviously, the price point is important. Investors are also looking for a minimum amount of money in, with a maximum return, and again there are not many places in the world that you can buy turn key ready properties for $35,000 all in with full on the ground management, which we provide in every city we sell homes in.”
Much of the positive growth is attributed by Moodie to a lack of available stock. In November 2015, there were 21,559 homes and condos on the market in the four-county region that includes Wayne, Oakland, Macomb and Livingston. In the same month in 2016, there were 12,520, a 41.9 per cent drop. This is causing quick turnaround times for sellers, as the average number of days on the market fell from 45 in November 2015 to 39 in 2016, a 13.3 per cent fall.
“We have definitely seen an increase in our average sale of approx $5,000 per door,” notes Moodie.
That potential for future capital growth is also helping to attract investors seeking long-term assets, as opposed to quick speculative purchases.
“In my opinion, investors are looking for steady growth and good returns. At the moment, the city of Detroit provides both of these,” comments Moodie.Google+