Posted almost 10 years ago

Wondering how the rental rates are in Metro Detroit?

How are the rental rates going in Metro Detroit?

We get this question a lot of the time. People are very interested in the Michigan rental market and where we are headed. Really, the numbers can be a bit surprising, even without the final 2014 numbers being released yet.

In 2013 though, the last full year we have records for, the Metro Detroit, Michigan area had a median rental rate of $829.00 per month. That is compared to the US median rate of $905.00 per month.

From 2012 to 2013, the Metro Detroit median rent did a bit worse than the US average, with a one year change of .48%, compared to the US increase of .89%.

However, if you look at the 3 year change, that is where the surprise shows up. Over a 3 year period, the median rents in Metro Detroit actually went down 1.78%, and the US as a whole was down about .55%.

The Metro Detroit market peaked in real terms in 2008, when the median rents were $876.00 per month. Since then rents are actually down 2.63% from that peak.

Does that mean that Metro Detroit is not the great rental market that people have led you to believe? Not at all. The rental rates have remained steady, while not accelerating quickly. We are seeing a bit of an uptick through 2014 from our own internal rental accounts and tenants are coming with better credit and better income histories.

So, how much are tenants spending on rent, compared to their income?

Metro Detroit has actually seen the median annual rent as a fraction of household income go down over the last 3 years, though only by .2%. It really shows that Metro Detroit renters as a whole are doing a good job of making sure not to spend too much on rental housing and then not being able to withstand unexpected expenses. Typically, in Metro Detroit, renters are spending about 19% of their income on rent, which is a great number. We have set our highest percentage of rent to income at 33%, because you can’t have tenants with a small amount of money at the end of the month and living paycheck to paycheck.

The number has risen since 2005 from just under 17%, but it is still not an unmanageable expense to most renters.

The rate of renters compared to total households in Metro Detroit is also below the US average. According to the website Department of Numbers, Metro Detroit has a renter rate of 31.41% of the households. That is up about 2.5% over the past 3 years. The US as a whole has a renter rate of 36.5%.

So where does that leave an investor?

The Metro Detroit market is still very solid. Deals are starting to have smaller returns, but they remain ahead of the US market as a whole.

Vacancy rates in the Metro Detroit area have also done very well, falling from a high of 11.25% in 2006 to a rate of 6.34% with that number improving as we move through this rental season.

Metro Detroit is a solid investment area, but as always, you need to do your homework when purchasing in any area you do not know intimately.

Feel free to reach out to us at any time for more information by visiting www.aspectproperties.com!

As we always say, “You manage your life. We’ll manage your properties!”

Aspect Properties

1812 S. Rochester Road, Suite 101

Rochester Hills, MI 48307

(248) 651-2700

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