A robust high-end housing market around Detroit has made the car manufacturing capital a comparative, and perhaps unexpected, bright spot in the U.S. luxury-home market—something worth noting for affluent home buyers and investors seeking value.
In the third quarter, Detroit ranked No. 9 in the luxury breakout of The Wall Street Journal/Realtor.com Emerging Housing Markets Index, which looks at the top 10% of housing in major U.S. metros. The median luxury listing price rose a steady 6.4% year over year, as limited high-end inventory around the Motor City kept deals moving faster than in much of the rest of the country, according to data from Realtor.com.
“The ranking is unusual considering the difficulties, such as crime and urban blight, Detroit has gone through in the last couple of decades,” said
Jonathan Miller,
president of appraisal firm Miller Samuel and author of a slew of quarterly housing reports on major U.S. cities.
In recent quarters, smaller metros with strong employment, including others in the Midwest, have come out on top of the The Wall Street Journal/Realtor.com ranking’s luxury cut, as affordability drives sales even at the higher echelons of the market.
Miller noted that “Detroit home prices are “still relatively low when compared with lots of other luxury markets, which can be three to four times higher.”
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For instance, the median listing price among the top 10% of listings in the Detroit metro was only $733,000 in the third quarter, according to Realtor.com. (Mansion Global is owned by Dow Jones. Both Dow Jones and Realtor.com are owned by News Corp.)
Miller noted that there has been “sharp price growth in the markets around the city because they are coming from a much lower point.”
The No. 9 ranking, he added, is still “impressive.”
Danielle Hale,
Realtor.com’s chief economist and one of the authors of the Emerging Housing Markets Index, said that luxury buyers are active in Detroit because “their real estate dollars can stretch more.”
Hale said that the “auto industry is a big driver” in the city’s ranking because the transition to electric cars is “propelling the market” for new top talent. “In Detroit, a little less than half of the home shoppers are from the metro area, and 52% are from other major cities,” she said.
Almost 29% of these out-of-state buyers are from the New York City area, she said, and 8.8% are from Washington, D.C.
Besides parts of downtown Detroit, the most expensive neighborhoods in the city are Palmer Woods and Corktown.
In the suburban metro area, home buyers and investors might do well to look at Birmingham, Bloomfield Hills and Royal Oak. Along the Woodward Corridor, which is also known as Detroit’s Main Street, they are what Dan Gutfreund, global real estate adviser at Signature Sotheby’s International Realty, calls “a pocket of home affluence.”
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Birmingham
The center of the metro area’s wealth and the most exclusive neighborhood around Detroit, Birmingham is located between Bloomfield Hills and Royal Oak. It’s about 20 miles north of the city and covers only 5 square miles.
There’s a lot of new development in the community, as builders are buying up the older houses that date from the 1930s to the 1960s and erecting new single-family luxury homes that sell for $2 million to $3 million.
The walkable neighborhood has a “downtown feel,” Gutfreund said, adding that the average price per square foot for luxury single-family homes is $700 to $950. Luxury housing that’s older than three years typically is priced at $400 to $600 per square foot.
Luxury-home prices generally range from $700,000 to $6 million, and many deals are all cash.
At Brookside Residences, a newer high-end boutique condo development with 28 units, Gutfreund said purchasers bought raw shells for $1,000 per square foot and brought in architects and designers to create $5 million to $6 million residences.
“Although it doesn’t have a hotel component,” he said, “the development has been compared to Ritz-Carlton living because of all the amenities,” which include in-home medical care, wake-up calls, car and concierge services, private chefs, housekeeping and dry cleaning.
This new-construction house, in Birmingham, is listed for $5.995 million. It’s 6,454 square feet and has five bedrooms, five full baths and two half baths.
DG REALTY GROUP
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Bloomfield Hills
Some 25 miles northwest of the city, Bloomfield Hills is characterized by estate homes that are larger than those in Birmingham and that are set on larger properties. Notable residents of the community have included Aretha Franklin, whose stately brick home has been on and off the market since her death in 2018, and NBA player Kelly Olynyk.
Prices of older luxury homes are similar to those in Birmingham: $400 to $600 per square foot. High-end new builds typically come in at $600 to $1,000 per square foot.
Prices for luxury properties generally start at $2 million and can climb to $10 million, Gutfreund said, adding that purchasers typically don’t take out mortgages.
“The average luxury price is $2 million,” he said, adding that Bloomfield Hills doesn’t have as many new-construction houses as Birmingham. “Ultra-luxury residences start at $4 million and can go to about $6 million to $7 million, but you rarely see one above $5 million to $6 million; spec builders tend to top out at $4 million because that’s where the market thins for buyers.”
This 9,392-square Bloomfield Hills house, which is under construction, is set on 1.2 acres. It is listed for $6.995 million.
DG REALTY GROUP
Royal Oak
Although Royal Oak “isn’t a pinnacle of luxury,” Gutfreund said, “it’s an up-and-coming neighborhood on the cusp of Birmingham and Bloomfield Hills” that has a lot of investment potential.
Developers have put it on the map, tearing down the 1930s and ’40s bungalows and replacing them with $1 million residences.
“It’s a builder’s frenzy,” he said. “New inventory is so scarce that houses stay on the market less than 30 days.”
He noted that luxury prices for single-family homes typically are $350 to $450 per square foot, and generally range from $1 million to $1.5 million.
Only two miles north of Detroit’s city limits, Royal Oak is the perfect place for new families and young professionals. “Most of the buyers here do take out mortgages,” Gutfreund said.
Listed for $1.99 million, this recently renovated 3,124-square-foot house in Royal Oak has four bedrooms, three full baths and one half bath.
DG REALTY GROUP
This article originally appeared on Mansion Global.
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