The coronavirus pandemic has caused a shift in thinking for many Americans. This shift in thinking has hit many industries in different ways, but one of the most interesting areas the pandemic has affected is the real estate market, and no city has a more interesting and growing market than Detroit.
If you’re thinking about buying a home in the Detroit area, you should first consider the many trends which are shaping the city. Understanding the real estate market is a great first step in making financially sound and smart investments. Here are several of the most important trends currently shaping the real estate market in Detroit.
Houses are Valued Higher Due to Remote Work
Not every trend in the Detroit housing market is going to be directly affected by the coronavirus pandemic, but remote work certainly is. People are working remotely, and many are even quitting in-person jobs in order to work from home, because of the uncertainty and fear of the pandemic.
This shift in thinking about the way work is done has caused house prices to rise as millions across the country search for the perfect home not just to live in, but to work from and live their lives through. This trend is happening all over the country, including in Detroit.
Home Values are Steadily Increasing
Detroit is also experiencing an interesting trend that is happening on a national scale. Home prices have been rising steadily throughout the last few years and have even accelerated as the pandemic lingers on. Millions across the country are moving out and trying to find a new abode for their family or loved ones.
Many cities even have bidding wars occurring for the right to build on land which is fertile and ripe for construction. The rising of housing prices is most likely not indicative of a bubble, as credit isn’t being lent out freely; rather, many may be witnessing the persistent growth and inflation of the market and are acting quickly to buy before prices continue to rise even further.
Housing Demand is Lagging Behind Other Regions
Throughout history, two of the most in-demand cities for housing have been New York and Los Angeles. This trend is actually beginning to reverse, and cities in Texas, Tennessee, and Colorado are seeing demand skyrocket at a greater rate than the rest of country.
Still, the Detroit marketplace continues to lag behind even the slow-risers and property is generally more affordable in the area than in most. Regional differences are becoming more pronounced as the market heats up; cities such as Austin, Atlanta, and Denver are experiencing the most extreme growth. If trends continue, Detroit will not grow at the rate of these other cities.
Inflation is Here to Stay
One of the primary factors driving homeownership is the depreciating nature of the dollar domestically. In times of great inflation, smart investors buy homes because they have an inherent and tangible value. As the dollar weakens, homes will continue to appreciate, meaning the investment parked in the value of a house grows in the long term.
Inflation is currently the number one issue in the domestic sphere, and more than one-in-seven houses bought across the country are purchased by private entities. Even in Detroit, private corporations are purchasing houses to store their profits and capital, often renting out houses to local residents. If you’re thinking of buying a house to counteract the effects of inflation, you’ll want to hurry, as prices are only rising, and the dollar is only depreciating at this point in time.
City Living is Decreasing
In recent years, families across the Detroit area have moved out of the city and into the suburbs. This movement is causing property in major urban areas to weaken in value, though inflation and other factors are counteracting this downward movement.
In general, suburbs around the Detroit area are appreciating while the value of property in the city is only moving downward. Experts aren’t expecting this trend to reverse for a while, so if you’re thinking of buying a home in Detroit, now is the perfect time to do so.
Interest Rates are Historically Low
Another factor driving up the value of properties around Detroit is the suppression of interest rates. The FED is considering tapering soon, which may have an effect of raising interest rates, but this action may end up coming later rather than sooner. While interest rates remain low, the Detroit housing market will continue to be a seller’s market.
The low-interest rates coupled with the demand from the pandemic is causing a competitive market to scoop up houses. In fact, sales have been up in 2021 nearly 15% from 2020, and this trend is predicted to continue into 2022 and possibly further into the future. Demand is so high, many homes are actually bought within a week of their opening weekend.
Past Renovations are Keeping Markets Stagnant
Finally, one of the more underappreciated but important pieces of the housing market puzzle are renovations made to houses during the pandemic. Many Americans, and especially those in Detroit, were discouraged from shopping around for housing during the pandemic.
This caused a surge of renovations, as families wanted the feeling of their ideal home without the means to move. These recent renovations quelled many desires to move out and shop around for houses, meaning many homes are being lived in for longer than they normally would be. This has caused a sort-of bottleneck in the market, as there are fewer homes available to buy.