Recovery Drives Detroit Home Sales
Recent economic news from the Motor City has shown a city struggling but determined to recover, as highlighted by the city's July 2013 bankruptcy declaration. Amidst reports of high unemployment rates and urban depopulation are promising signs of revival, particularly in the real estate market. Median house prices for the five-county Detroit metropolitan area rose by 34 percent from February 2013 to February 2014, according to Realcomp, a multiple listing service in Farmington Hills, Michigan. The increase marked the 12th consecutive month of double-digit growth, a rate among the nation's highest.
Challenges remain for the area's real estate market, though. The recovery is stronger in such upscale communities as Bloomfield Hills, Northville and Ann Arbor than in less affluent communities closer to Detroit or within the city limits. Throughout the metro region, median house prices are 27 percent off their peak of late 2005 and early 2006, and 28 percent of metro-area homeowners are underwater on their mortgages.
Though the population of the Detroit metro area has decreased in the last decade, the housing inventory has consistently dropped, as well -- decreasing by 15 percent from March 2013 to March 2014 -- as vacant homes are held off the market for repairs and rebuilding. Low inventory and increasing demand during the recovery have put area home sellers at an advantage. With a median sale price of $142,450 for the area, FSBO (for sale by owner) sellers listing their homes for sale in Detroit without the services of a real estate agent will further benefit, saving the agent's 6 percent commission, an average of $8,547 in the Detroit market.
The most important features driving a purchase for Detroit home buyers are in the areas of home amenities and floor plans, according to a 2014 survey by ForSaleByOwner.com. Two-thirds of Detroit home buyers list a garage or carport as the most important feature in a home they are considering purchasing. Central air is next on the list, chosen by nearly 60 percent of respondents, followed by the house being in move-in condition. A single-level floor plan and an open layout round out the top five important features. The most common deal breakers for buyers are a lack of a garage or carport, a floor plan that is not single-story and a lack of central air.
Neighborhoods within the city of Detroit have shown encouraging recovery since the housing bubble collapse, with new construction -- primarily in high-rises and condominium units -- in the Downtown and Midtown neighborhoods. Other popular residential areas in the city include Indian Village, a district listed in the National Register of Historic Places that features a collection of beautifully restored 1920s-era mansions. Palmer Woods, a historic community in the northwest area of the city, offers elegant examples of Tudor Revival architecture. Notable residential neighborhoods in the suburbs include Royal Oak, a pedestrian-friendly community that hosts a wide variety of shops, restaurants and entertainment venues; Bloomfield Hills, one of the top five wealthiest towns of its size in the United States; and the five Grosse Pointe communities with their lakefront access and famous historic estates. Neighboring Ann Arbor is home to the University of Michigan, which influences the town's economy and culture in areas ranging from its historic support of liberal political causes to a rich arts community featuring unique shops and boutiques, street festivals and outdoor fairs.
Up next: Denver, where a combination of low mortgage rates, rising home prices and a small inventory of available homes have created a seller's market.
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