A comparison of Metro Detroit’s economic statistics four years ago with the most recent figures shows a dramatic change of landscape. Four years ago Detroit’s population was in decline and the unemployment level was 15%, whereas in 2013 the population increased by 4,540 and unemployment was down to about 8%. 2013 marked the fourth consecutive year of improvement in these two important categories.
A more detailed look at recently published figures provides further reason for optimism. Take the following data:
– Metro Detroit added 146,420 jobs in 2013.
– Technology sector employment was up 15% for the most recent year on record.
– The average hotel occupancy level was up to 62.4% at the end of 2013, from 47.5% in 2009.
Not only is the overall number of employees rising in Detroit but, importantly, it is rising in sectors conducive to future growth. The fact that Detroit’s tech sector is growing at a faster rate than that of almost any other area of the U.S. (Silicon Valley tech employment actually dropped by 4%) points to the continuing diversification of the local economy. Metro Detroit is becoming less dependent on its traditional manufacturing jobs and expanding into highly-specialised industries with strong growth prospects.
Hotel occupancy is also a good barometer of increasing local commercial activity, as most hotel guests visiting the metro area do so for business purposes. Occupancy is now a respectable 62.4%, compared to 67.4% in Chicago. Chicago had close to a 10% lead over Detroit in 2009, which has now halved to 5%.
What does this mean for house prices?
Although prices have risen rapidly over the past year in Metro Detroit, there is still considerable upside. The chief economist at U.S. listing company Trulia reported recently that Metro Detroit was the most undervalued metro housing market in the U.S., with an average undervaluation of 20% relative to fundamentals. Furthermore, the median house price in Detroit is only half the national median, at US$87,500 compared to US$175,000 for the U.S. as a whole.
From our perspective this news is very encouraging and we believe our investors are well situated to benefit from continued gains in the housing market as Detroit’s economy gathers momentum in 2014.
Tags: detroit economy, detroit housing, detroit recovery