Renting or Buying a Home in Detroit…Which Makes the Most Sense in Today’s Economy?

National Financial Literacy Month just ended, but it’s an excellent time for people thinking about moving to weigh whether it’s more financially prudent to buy or rent in Detroit.  According to most real estate industry professionals, the question to buy or rent is not a one-size-fits-all answer, and making the right decision will involve numerous factors, such as evaluating of one’s employment and financial stability, credit score, lifestyle preference, and long-term goals.

“The benefit of buying is that you are basically locking in, to a certain degree, your monthly housing costs in an environment where rent is constantly going up,” Austin Black II, an associate broker at City Living Detroit/Christie’s International Real Estate, told the Michigan Chronicle.  “In terms of renting versus buying, I see renting as a benefit for someone who views their living situation as more short-term, like a couple of years or so.  However, my goal is to work with clients to make sure that they make the right choices.”

Renting typically involves paying a lower initial cost of a security deposit and the first month’s rent, possibly paying both the first and last.  Other benefits to renting are that maintenance costs and repairs are the landlord’s responsibility, freeing renters from an array of surprise expenses.  In essence, renting allows the tenant to set and follow a budget because of fixed monthly payments.

Conversely, real estate experts said that monthly rent payments don’t build equity, as opposed to what mortgage payments will do on a home over time.  And rent prices can and do rise, with the possibility of a landlord deciding to sell the property or not renew a tenant’s lease.

“If you are looking for stability, purchasing a home is always your best option,” said Ursula McCray, a Detroit-based licensed real estate agent for Atlanta-based The Thomas Agency, which serves clients in Georgia, Michigan, and California.  “While the cost of homes in Detroit and the Metro area will rise, buying a home before they rise, along with interest rates, is a good move.”

Many realtors in the city and across Metro Detroit are seeing an uptick in homes purchased by  Millennials and the “older age bracket” of Gen Z.  Millennials, also known as Generation Y, refer to anyone born between 1981 and 1996, and Gen Z includes anyone born from 1997 through 2012, according to the Pew Research Center.

“I’m seeing many homebuyers in their mid-20s to early 30s looking to purchase homes,” McCray said.  “I see newly engaged and newly married couples and young families looking to build equity through purchasing homes coming to me to help them.”

At 27 years old, Jonathan James, a licensed realtor with Max Broock Realtors in Michigan, was born on the cusp of Gen Z and Millennials.  James said that he’s seeing a different type of trend involving “older Gen Zers” (ages 22- 27) and Millennials (28 – 43) opting to rent/lease homes or condominiums in downtown and mid-town Detroit, Royal Oak, Birmingham, and West Bloomfield Hills, even though they can afford to buy, including Detroit pro athletes who he has worked with to fulfill their respective housing needs.

“While I always talk with my clients about the value of buying as an investment versus renting/leasing, many Gen Zers and Millennials don’t want to make the long-term commitments related to living situations,” said James, who is also licensed in Florida.  “However, some of my Gen X or Boomer clients are choosing to buy rather than rent, knowing the rising values of homes in Metro Detroit are below the national average.”

Interestingly, in a New York Times article earlier this year titled “Where Can Gen Z Buy a Home?” Detroit was among the top three American cities listed. The story said, “Homeownership among Gen Z is about 17 percent in Detroit, a good indicator of continued success for others in the age bracket.”

In another survey of Gen Zers and Millennials in Detroit, conducted by Rentcafe, a nationwide online portal used by millions to locate rental properties, the published findings seem to support the trend of renting versus buying.  The survey reported that the Gen Zers in Detroit are anticipated to spend $121,800 on rent by age 30, compared to the cost of home ownership at around $145,300.  The same report included Detroit Millennials in their 20s, who are expected to spend $107,600 on rent before hitting 30 compared to $159,000 in costs to own, excluding the down payments.

Black said he also sees many older Gen Zers entering the housing market as first-time buyers in Detroit and throughout the tri-county area.  Yet, he continues to serve clients who are Millennials, Gen Xers, and Baby Boomers, who, in most cases, are not purchasing their first home.

“I am also working with people relocating from other states,” Black said. “Many are coming from areas on the West Coast, particularly California.  On the East Coast, people are moving here from the Washington, D.C. area.  Some have ties to this area, but some do not.  The driving force for many looking to purchase here is that the housing costs in Detroit and Metro Detroit are much lower than where they come from.”

James agreed, having worked to find Metro Detroit housing – rental or purchase – for clients relocating from states including Indiana, Georgia, and Florida.

“Many people are surprised with the quality of beautiful homes and condominiums in this area,” James said. “Metro Detroit doesn’t always get the accolades it should, but we have living spaces for sale or lease in price ranges that other areas of the country just can’t match.”

“Detroit and its economy are growing,” McCray said.  “And while home prices in Detroit will be on the rise, buyers will still get more bang for their buck in this area compared to other areas across the country.”

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