Well, it looks like the time has come where the American dream of homeownership in metro Detroit is deteriorating even more than before, stick around and find out why.
In the past, a lot of headlines about this ever changing housing market didn’t affect areas in Metro Detroit, but as of recently, these headlines are hitting us where it hurts, right here at home.
If you’re new here, my name is Andrew McManamon here with living in Michigan as a licensed realtor. I have helped people relocate from all corners of the world to the great state of Michigan, so don’t hesitate to reach out anytime. I am happy to be your go-to resource.
Corporations Are Buying Up Houses IN TRUCK LOADS!
If you’ve been watching my Michigan housing market videos for awhile, you’d know the issue with big corporations buying up housing and turning them into rentals has had minimal effect on metro Detroit and the state of Michigan in general, but as of late, that twisty knob was turned the other way.
Since 2019, there has been a 300% increase in build to rent homes, with a record breaking year in 2023 with over 27,000 homes completed, which went up 75% from 2022 according to rentcafe data. So what is a build to rent home exactly? Well, exactly as it sounds, where homes or units are built for the sole purpose of being rented for a long period of time, oftentimes maintained and managed by larger companies over individuals. Detroit alone had an increase of built for rent homes of 81% from 2019 to 2023, which equated to 2,114 units, which is only 300 or so behind Houston Texas. All this just to say, Detroit is now the nation’s 5th top metro for new build to rent houses, which doesn’t surprise me after you see hundreds of headlines about Detroit doing that, Detroit doing this, a billion dollars here and a gazillion dollars there.
The reason 2023 was such a big year for these in a data sense is a lot of the projects came from the boom the pandemic caused, and while things were more affordable, as well as some delays that led to the completion falling within the same time frames of 2022 and 2023. This type of housing may seem like a new concept to you, but the reality is, it’s always been there in a vertical sense with apartment buildings and condos, and now it’s becoming more common to have them horizontal as single family detached homes. When you put these communities side by side with a “normal” one, you may not be able to tell the difference, but there definitely is one.
Built-For-Rent Communities On The Rise
The concept of these BFR communities is that they are in fact an ACTUAL community, where the units are all built at the same time, and they'll typically have more amenities such as pools, fitness centers, sport courts, and a homeowners association to overlook it all, which would allow you to not have to mow your lawn or be responsible for anything on the exterior of the home, which creates a hands off approach for the tenants living in them.
A Great Business Model?
The investors and developers say this is a great business model that is more beneficial to tenants too because the community would have designated contacts for any issues that arise, such as a maintenance person that would handle the whole community, customer service, which is different from your typical single family home for rent as you need to treat it as your own, taking care of the interior and exterior maintenance. For those of you watching, is this something you’d like to have or would you rather just own your home outright in a community like this? Drop your thoughts in the comments below.
On one hand you have these investors and developers saying this solves the inventory problem and creates affordable housing for people while others say you’re taking the American dream of homeownership away from people who want to actually own their home, and with these changes happening, the average person is starting to feel the impact of these new developments. A real estate broker was interviewed about this and said, it used to be a couple home buyers bidding against each other, and now it’s you, me, this hedge fund, that investment group, this local investor, and it’s creating more and more challenges for the future of homebuyers.
This wave of build to rent communities is coming at a time where the largest pool of homebuyers are finally starting to settle down and lock in a location, so these communities have gained a lot more popularity and are known to not have a big turnover, as they have been known to have around a 74% renewal rate. It’s said that these properties are built and designed for easier renovation and maintenance, access to systems, and they are supposedly more equipped for turnover as well, which is all fine and dandy for the convenience of a maintenance person and landlord, but how good of quality can these communities be when they slap them together all at the same time and they go up so much quicker than a typical single family subdivision.
I’ve seen quite a few community builders that do the same thing and the owners are having issues almost immediately based on how horrible the workmanship is. Of course I understand that it doesn’t matter for the tenant because they don’t own it, but I know there’s got to be a few of you out there who have lived in some bad rental properties that have affected your well being, your health or destroyed your belongings due to neglect, but we will keep an eye on that in the future. I’m curious what long term looks like for these communities.
More Flexibility?
Of course this next point is highly dependent on how each community presents itself, but there’s said to be some flexibility to not only make changes to the units, by installing things like solar systems, or even converting them into a small commercial venture like a neighborhood cafe or coffee shop, there’s several possibilities for this kind of living.
So where have companies spent their time building communities like this? Well, metro areas like Austin, Orlando, Tampa, phoenix, as well as Nashville, Charlotte, Atlanta, and Charleston. But as of late, BTR companies have been keeping an eye on the growing electric vehicle industry and are moving more north into places like Columbus Ohio and Detroit as well.
Despite these headlines glorifying these build to rent communities, there have been hardships. Like I mentioned about many of these communities being built or started during and before the pandemic when funds were easier to raise, these days with interest rates and inflation the math isn’t making a lot of sense to the developers of these communities, so what we are finding is, they are selling these communities to builders to be for sale instead of for rent because of the higher cost debt that comes with the market pressure right now, but don’t expect these communities to go away, because they will be coming in hot.
So what do you think, is this a good thing based on how slim the housing inventory is? Or do you think it’s a bad thing and these homes should be built to sell?
Thanks as always reading, If you’re looking to buy, sell or invest in the wonderful state of Michigan, don’t hesitate to reach out, I’m happy to be your go to resource, Until next time!
Cheers,
Andrew
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the pillars of Michigan real estate. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be the best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major in business and marketing, and currently resides in Brighton, Michigan.
Check Out the EXCLUSIVE "Living In Michigan" Apparel HERE
Subscribe to the Living in Michigan Newsletter HERE
Comments