The cost of renting an apartment in Detroit is on the rise. According to a recent report released by national apartment search service ABODO, Detroit saw the largest rental rate increase in the nation in 2019 at 7.48%.
The average cost of a one-bedroom apartment in Detroit was $886 in 2019, ABODO reports, a price that’s still considered affordable compared to the national average of $1,476. Cleveland ranked second for the highest rent increase with a 3.85% price jump to $782.
San Francisco still has the highest rental rates in the U.S. with the average one-bedroom apartment costing $3,560 per month. New York City is second with one-bedroom apartments costing $2,750.
Michigan’s housing market is heating up
Michigan’s population growth may be slowing down, but thousands of new residents are still making their way to the Great Lakes State. In 2019, Michigan welcomed 3,000 new residents and over 10,000 in 2018.
Southeast Michigan, especially, has seen significant growth in the small business sector. Approximately 400 million entrepreneurs are currently operating worldwide and Michigan is home to 227 entrepreneur support organizations alone. But this growth comes with a downside.
Low inventory and high demand are causing the state’s rental rates and housing prices to climb. Since the 2008 market crash, developers have been cautious about building new houses and many Americans who are now retiring (the first baby boomers turned 65 in 2011) are choosing instead to age in place rather than sell their homes. As a result, home values throughout Michigan are up 5.92% from 2018 at an average of $148,775.
Housing costs are still affordable
Fortunately, despite a growing population and a hot housing market, property values in Michigan are still lower than what the typical house is worth nationwide. The median home value in the U.S. right now is $229,600, a 4.88% increase from 2018.
Housing costs are also expected to climb. According to Zillow, the average home value in the U.S. will jump by 2.2%. In Michigan, home values are expected to see a 2.38% increase in 2020.
To make owning a home more affordable, real estate experts recommend saving not only for a down payment and closing costs but also for home maintenance and repairs. Typical home maintenance includes cleaning your gutters twice a year, repainting cedar siding every three years, draining water heater sediment once a year, inspecting your roof twice a year, and more. Between 1% to 3% of your home’s purchase price ought to be set aside each year for repairs and maintenance.
Remember to account for even more of these costs if you plan on using your garage as a workshop or a similar space. These spaces often require additional appliances, like compressed air systems. Luckily, the U.S. Department of Energy has found through energy audits that over 50% of compressed air systems have low-cost energy conservation opportunities. These savings will make your home more eco-friendly and save you money on energy bills.
“When you’re a homeowner, you can’t call your landlord to fix things, so you want to make sure you have a little extra cash in the bank,” says Danielle Hale, chief economist for realtor.com. The transition from renter to homeowner is a big step, she says, so it’s important to make sure to take the time to learn about the maintenance costs associated with potential homes before you buy one even if the home seems affordable on paper.