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METRO DETROIT — While home and apartment rental prices nationally are seeing modest increases over the last year, prices in the metro Detroit area are seeing much higher price spikes in 2023.
Abe Cadoura, a Realtor at Century 21’s Curran & Oberski office in Royal Oak, said that in the metro Detroit area, it’s an incredibly challenging time to find good rental prices.
“In the metro Detroit area, rent is the highest it’s ever been,” he said. “For whatever reason, whether it is job security or maybe someone being employed for a short-term period, it seems that rentals are in high demand. In some cases, a rent payment might exceed a mortgage payment in that community.”
He said that job security concerns and recent upheavals in some Detroit-area job markets might be causing people to be more cautious about planning their living arrangements.
“It appears that job security is a big driving force,” Cadoura said. “People don’t want to get locked into a 30-year mortgage. The UAW strike, for instance, might be getting people to put home shopping on hold or rethink future plans.”
He said that home prices are several hundred dollars more a month than in 2022.
“Rentals right now in the Royal Oak and Birmingham area are going anywhere from $2,200 to $4,400 per month for a 12-month lease period,” Cadoura said. “We’re seeing about a $500 or $600 increase over last year. This is about average, perhaps slightly higher than average increases in the average prices. Of course, this depends on the size of the home. … We’re seeing prices of about $1,500 to $1,600 a month in the Dearborn area. We’re seeing prices of about $1,700 to $2,200 a month in the Livonia area.”
He said that while his office doesn’t usually deal with apartment rentals directly, apartment rental prices are seeing the same hike as rental homes.
“Apartments don’t like dealing with Realtors. We might direct people to who they should be contacting or answering questions if they are looking for apartments,” Cadoura said. “Apartments are anywhere from $2,500 to $3,500 a month for a 12-month lease period in the Royal Oak and Birmingham area.”
Realtor.com found that the national rental market experienced single-digit growth for the ninth month in a row after 15 months of slowing heading into the summer, noting that median rent across the top 50 metro areas in the country was up just 0.3% year over year, the lowest growth rate since the onset of the pandemic. The median asking rent was $1,734 per month.
“In April, we continued to see rising rent prices and a moderating growth rate. This is promising news for renters, suggesting that the pandemic peaks are behind us, and that the challenging affordability picture may begin to improve,” Realtor.com Chief Economist Danielle Hale said in a press release. “We’ve seen record-high new construction occurring in the multi-family space, which is creating more units, helping to reduce competition and in turn helping to ease prices.”
She went on to say that although affordability is improving on average in the United States, prices are still high
Realtor.com stated that one major factor contributing to lower rent prices is a significant increase in multi-family construction. This has helped the vacancy rate reach its highest level in two years, at 6.4% in the first quarter of 2023. They said that as more new rental properties are added to the market, the vacancy rate could inch back toward the norms seen in 2013-2019, which were about 7.2%, and would improve affordability for renters. Despite more available rentals and slowing rent growth, average rent still costs $348 more than it would have at this time in 2019.
Cadoura advised those looking to rent to keep a close eye on the market and said it was prudent to focus on their short term situations rather than their long term goals.
“Select an area that is important to them, whether that is because of the school district, proximity to work or family, and so forth,” Cadoura said. “Check the price points, confirm what they are getting for that rent, and then look at things, at how they will stand in the next 12 months. Don’t look too far into the future. In the real estate market, things can change monthly, weekly, daily. Things can be radically different two months from now. Some people will put a home up for sale at 2022 prices and we have to bring them back down to Earth and tell them what is going on in the market right now.”
Hale said that renters who renew their leases tend to pay less than those who sign new leases. A 2022 survey from Avail, a Realtor.com business, found that renters signing a new lease reported a price increase of nearly 27%, which is about double what people who have been in their rental for one to two years have experienced. To avoid paying this premium, renters are renewing leases at record-high levels.
“Realtor.com monthly data is based on median asking rents rather than survey responses, which are used in the (Consumer Price Index), so CPI data lags behind what we’re seeing,” said Hale. “The data suggest that easing in the cost of shelter is ahead in future CPI reports. While this could take until 2024 to play out significantly, it will be welcome news for renters and for overall inflation.”
