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Axios Detroit Thought Bubble

Axios Detroit

Detroit’s real estate market is starting to level off, according to the latest MLS data from Realcomp. 

Why it matters: After two-plus years of plummeting inventory and sky-high home prices, Detroit-area buyers have waited a long time for a little relief.

What’s happening: Inventory, inflation and interest rates are driving the market, Jeanette Schneider, president of RE/MAX of Southeastern Michigan, said.

Inflation makes it harder for folks to save up for a down payment. 

Higher interest rates mean higher monthly mortgage payments, which puts buying out of reach for some. 

Less demand and more inventory leads to lower home prices.

Data: Freddie Mac; Chart: Madison Dong/Axios Visuals

Inventory of homes for sale in Detroit was up 25.5% in August. 

Closed sales are down 17.2% compared with this time last year.

And while median home prices are up 13.3% year over year, they have fallen in recent months.

For example, in June, the median sales price was $100,250 and in August it was $85,000.

30.3% of Detroit listings had price drops in August, up 12.4 points from last year. 

23.7% of homes sold for over asking price, a 5.3-point decrease from last year. 

Zoom out: What we're seeing now is in line with 2019 and the pre-pandemic market, Karen Kage, chief executive of Realcomp, said. 

She's been in real estate for 43 years and says conditions in 2020/2021 were highly unusual. 

Looking at a five-year period, however, Detroit's home values have appreciated healthfully. 

What it means: Even though Detroit isn't seeing the inventory rebound quite like other parts of the country, local buyers still have more options than early 2022 and 2021, Schneider said. 

A less-frenzied market means buyers can take their time touring, offer closer to asking price and get an inspection.

What they're watching: Mortgage rates. How those change, or not, over the next several months will have a big impact on the market. 

Buying a house in Detroit is easier now, but not cheaper

After two-plus years of plummeting inventory and sky-high home prices, Detroit-area buyers have waited a long time for a little relief.

Photo: Jeff Kowalsky/AFP, via Getty Images

Real estate

Detroit’s real estate market is starting to level off, according to the latest MLS data from <a class="gtmContentClick" data-vars-link-text="Realcomp" data-vars-click-url="https://realcomp.moveinmichigan.com/" data-vars-content-id="1e135811-afb7-484c-9f49-90198128e4ae" data-vars-headline="Buying a house in Detroit is easier now, but not cheaper" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://realcomp.moveinmichigan.com/" target="_blank">Realcomp</a>. Why it matters: After two-plus years of plummeting inventory and sky-high home prices, Detroit-area buyers have waited a long time for a little relief.

Real Estate

Mortgage rates surpassed 5% — the highest it's been in more than a decade, according to data shared by Freddie Mac. 

Why it matters: Low mortgage rates made buying in a sellers' market more affordable in the pandemic. 

Median home sale values in Detroit have cooled since summer 2022, and they were only up 5.5% year over year as of March 2022, but borrowing money is more expensive now.

Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios

State of play: A year ago, mortgage rates were at 2.97%. In late April 2022, mortgage rates were at 5.11%.

By the numbers: If you were to take out a $150,000 30-year mortgage loan in April 2021, your monthly principal and interest would be around $630, according to numbers shared by Freddie Mac. 

Your monthly payment on the same loan in April 2022 would be $815. 

That's $185 more per month, $2,220 a year and $66,600 more over the life of your loan.

What's next: Mortgage rates are expected to rise throughout the year, averaging 4.6% for 2022 and 5% for 2023, according to Freddie Mac's trend forecast. 

We're still in a critical supply crunch, so even if home prices remain stead or cool, buyers will likely feel the squeeze of a tight market.

The latest: Metro Detroit's housing market remained robust in April despite rising interest rates, Crain's Detroit Business reports.

Sales prices remain high and inventory is tight.

Surging mortgage rates make home buying more expensive in Detroit

A year ago, mortgage rates were at 2.97%. In late April 2022, mortgage rates were at 5.11%.

Illustration of a house's roof being taken off by a trend line soaring upward through the home

Mortgage rates surpassed 5% — the highest it&#x27;s been in more than a decade, according to data shared by Freddie Mac. Why it matters: Low mortgage rates made buying in a sellers&#x27; market more affordable in the pandemic.

Metro Detroit's real estate market is holding steady for now.

Why it matters: We keep hearing about a market crash, but so far, local data doesn't support that claim. Pending home sales are up 4.6% and median home sale prices are up 6.25% from May 2021 to May 2022, while new listings are up 7.4%.

Zoom in: While data shows the market holding steady, real estate agents on the ground say buyers are negotiating with a little more leverage, per the Free Press. 

Bidding wars still happen, but some buyers are now able to negotiate a sales price slightly under the listing.

"A year ago, you were negotiating up, not down," agent Abe Taleb of RE/MAX Leading Edge in Dearborn Heights told the paper.

Zoom out: Nationally, mortgage applications were down 24% in the same time period. On average, 6.5% of sellers dropped their asking price each week in June, per Redfin’s latest market update.

In June, national pending home sales were down 13% from this time last year,  the largest decline since May 2020, Redfin's report stated.

What we're watching: New listings and pending sales. If more listings flood the market this summer and buyers don't bite, that's when we would start to see more power shift into buyers' hands.

Detroit's real estate market isn't cooling just yet

We keep hearing about a market crash, but so far, local data doesn't support that claim.

Illustration of a white picket fence shaped like arrows trending upwards

Metro Detroit&#x27;s real estate market is holding steady for now.Why it matters: We keep hearing about a market crash, but so far, local data doesn&#x27;t support that claim. Pending home sales are up 4.6% and median home sale prices are up 6.25% from May 2021 to May 2022, while new listings are up 7.4%.

News

Fluctuations in metro Detroit's real estate market could continue to perplex buyers and sellers considering a move this year.

Yes, but: The market is starting to cool off. Factors like normalizing interest rates and less competition among buyers are expected to create more buying opportunities.

What they're saying: "Right now with the market like it is, you can offer a little bit less than asking. Several months ago you were paying over asking price," prospective buyer Jason Justice told WXYZ Channel 7.

The big picture: A housing market crash likely isn't coming for Detroit.

Here's what local experts say to expect instead:  

Surging rental prices and lack of quality options have turned renters into potential buyers, says Darralyn Bowers, owner of Bowers Realty & Investments.

The shrinking rental housing market will create more demand in the for-sale housing market, which should keep prices from declining overall.

Meanwhile, Gino Tozzi of Real Estate One predicts home sale prices will vary by area.

Buyers and sellers will each face different challenges

James Danley of James Danley & Associates says 2023 will feel more like 2019. 

There's going to be fewer transactions, which is "challenging for buyers looking for updated housing, and for sellers that have dated or imperfect housing."

"Inventory will continue to stay limited, but as interest rates become less volatile and normalize, more buyers and sellers will test the market instead of delaying the inevitable move," Tozzi says.

The large declines in home sales we've seen  will flatten in 2023 and into 2024, he added.

Bowers says that despite the lack of affordability, buyers won't have to jump through as many hoops — like offering over asking or adding closing incentives — to win an offer on a house. 

What experts say 2023 holds for Detroit real estate

The market is starting to cool off, creating more buying opportunities.

Illustration of the year 2022, with a keyhole for a zero, which zooms in so you can see through the keyhole to the year 2023.

Fluctuations in metro <a class="gtmContentClick" data-vars-link-text="Detroit&#x27;s real estate market" data-vars-click-url="https://www.axios.com/local/detroit/2022/12/19/starter-homes-more-affordable-detroit-michigan" data-vars-content-id="fd96c8cc-fac7-400c-90d7-bb8e58d8d526" data-vars-headline="What experts say 2023 holds for Detroit real estate" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/local/detroit/2022/12/19/starter-homes-more-affordable-detroit-michigan" target="_self">Detroit&#x27;s real estate market</a> could continue to perplex buyers and sellers considering a move this year.Yes, but: The market is starting to cool off. Factors like normalizing interest rates and less competition among buyers are expected to create more buying opportunities.

Brianna Crane

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What experts say 2023 holds for Detroit real estate

Buying a house in Detroit is easier now, but not cheaper

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Surging mortgage rates make home buying more expensive in Detroit