Despite a drop in new-home closings in the Detroit market, the first-quarter Metrostudy data for the market shows overall home sales are on a steady rise. Overall home closings reached 23,313 in the first-quarter, up from 21,083 in the fourth-quarter of 2013. Existing closings rose from 20,517 to 22,777 year-over-year from 1Q13 to 1Q14. While existing closings jumped, new-homes sales are slugging in the Detroit, Michigan market slight down to 536 from 566 in 1Q14. The previous quarter new-home sales hit a peak in the past year at 750. The large difference in new-home versus existing home sales exemplifies Detroit’s position as primarily an existing home market.
Overall the market has seen moderate price appreciation. The overall median closing price fell just south of $100,000 in the first-quarter of last year, but reached $177,600 in 1Q14. One reason for slow new-home sales while existing continue to climb is the large price difference between existing and new homes. In the first-quarter, new homes in Detroit reached a median closing price of $278,700, up from $251,300 a year earlier. This is more than double the median closing price for existing homes, which was $112,400 in 1Q14. Existing homes are therefore very affordable to the entry-level buyer while new homes price many out. The existing home median price per square foot is $73, while it is $130 for new-homes based on the first-quarter data. This is, however, a decline in the median cost per square foot of new homes, which was $136 in 1Q13. This means that although overall new-home prices are increasing, buyers are getting more for the money.
The average household age for the homebuyer in the Detroit market fell for both new and existing homes from 4Q13 to 1Q14, coming in at 46 for existing and 44 for new-home sales. The average household income for new buyers is also lower in the first-quarter than in 2013 with $92,167 for new-home sales and $68,322 for existing. Part of the sales struggle for new homes is likely due to job insecurity and unemployment in the region, which was estimated at 9.2 percent in May of 2014, up significantly from the 6.3 percent national average.
Learn more about markets featured in this article: Detroit, MI.