Who is buying all the expensive homes in Metro Detroit? (Birmingham: for sale, real estate market) - Michigan (MI) - City-Data Forum

DTWflyer · 07-11-2016, 08:30 PM

I'm curious to know who is buying all of the expensive homes in Metro Detroit. Its hard to believe when based on how far this place bottomed out in the past decade but the amount of luxury homes on the market seems to be at record highs. I'm talking about homes that are more than $700k.

Based on a quick Zillow search in Metro Detroit:
750+ homes $700K-$1M
400+ homes over $1M
150+ homes over $2M

I am trying to figure out where all the demand for these houses is coming from. Is there really that much accumulated wealth, new money, or wealthy people moving into Metro Detroit?

I know many business executives, doctors and other professionals that make very good money, but none really live in homes worth more than $500-600k. This isn't Silcon Valley where we have anything resembling a start-up culture with tons of venture capitialists, or a tech boom.

So what is it? Money coming down through families? A lot of debt? People moving from out of state out of higher cost areas?

NOLA101 · 07-12-2016, 07:56 AM

I have family members/friends with homes in the general $1m+ price range in Metro Detroit.

They tend to be professionals- doctors, lawyers, managers in companies. Also some small business owners. Also inherited wealth.

Granted, $1m is a lot of money, but not THAT much these days. In other real estate markets, $1m doesn't get you much. In Metro Detroit, it gets you basically a mansion. Where I live right now, $1m will get you a 1,000 square foot apartment.

keraT · 07-12-2016, 08:23 AM

I don't know any super rich people so can't comment. We have rich people in Metro Detroit so I am not surprise. The only couple I know who have over 700+K house are these almost retire couple who are both doctors plus 2 out of 3 of their kids are doing really well (one is doc and another is lawyer). The couple owns several small property that they once lived in and are rented out now.

mjlo · 07-12-2016, 08:27 AM

You're dealing with a market that has 5 million people in it. The fact that there are homes for sale in that price range shouldn't be surprising. Especially when considering the number of fortune 500 companies in the area. Not to mention the smaller companies and the entrepreneurial base. Detroit is a corporate center/R&D hub. Even if it weren't the numbers posted in the OP shouldn't be shocking given the sheer size of the region.

NOLA101 · 07-12-2016, 08:48 AM

If you want a nice, family sized home in Birmingham, updated and in move-in condition, you will pay something close to $1 million, at least in the neighborhoods west of Woodward.

I don't think these are mostly "super rich" folks; in fact many of the homes are simply typical suburban colonials, only expensive because of location. Some people are willing to take on huge mortgages even if they don't have huge incomes. They can make it work.

Geo-Aggie · 07-12-2016, 11:44 AM

I like to think I'm a "professional". My wife and I are both college educated, I work in a STEM field, my income puts me in about the 80th%ile of personal income and our combined household income is in about the 70th %ile. We budget well, drive reliable older cars (2010 models), have no consumer debt, and have a small family.

But we inherited nothing and we're far too young to have realized massive gains in the real estate market like people who have owned since the 90s. There is quite literally no way we could ever even sniff at a 1 million dollar home, or even a $400,000 home for that matter. Our reasonable budget, with 10% down, sits at $250,000 - despite our higher than median income.

I think DTWFlyer's question still stands. Who buys these homes? It's certainly not regular professionals - I doubt households bringing in 150k (90th %ile) could even afford these 750k+ homes. The housing market is such a disaster right now.

NOLA101 · 07-12-2016, 12:19 PM

Quote:

Originally Posted by Geo-Aggie

I like to think I'm a "professional". My wife and I are both college educated, I work in a STEM field, my income puts me in about the 80th%ile of personal income and our combined household income is in about the 70th %ile. We budget well, drive reliable older cars (2010 models), have no consumer debt, and have a small family.

But we inherited nothing and we're far too young to have realized massive gains in the real estate market like people who have owned since the 90s. There is quite literally no way we could ever even sniff at a 1 million dollar home, or even a $400,000 home for that matter. Our reasonable budget, with 10% down, sits at $250,000 - despite our higher than median income.

I think DTWFlyer's question still stands. Who buys these homes? It's certainly not regular professionals - I doubt households bringing in 150k (90th %ile) could even afford these 750k+ homes. The housing market is such a disaster right now.

As another poster stated, there are 5 million+ people in Metro Detroit. Why is it so surprising that a few thousand have million dollar homes?

A successful doctor or business owner or management level-professional can earn a very high salary. Some people inherit six-figure wealth. Others even inherit seven-figure wealth. We are talking a tiny % of the overall housing stock, not even the the 1% of the metro area but more the 0.25% of the metro area.

Or maybe they live in million dollar homes that were formerly much cheaper. Somebody who bought in the Quarton Lake neighborhood in Birmingham back in the 1970's probably paid close to nothing. Now they are almost guaranteed to have million dollar home worth.

djmilf · 07-12-2016, 12:37 PM

Quote:

Originally Posted by Geo-Aggie

I think DTWFlyer's question still stands. Who buys these homes? It's certainly not regular professionals - I doubt households bringing in 150k (90th %ile) could even afford these 750k+ homes. The housing market is such a disaster right now.

It's the people earning at least $250K who are buying these homes. And there are a lot of them in Metro Detroit. And most of them are either older people who road the baby boomer real estate escalator to owning high priced homes or are younger people who are mortgaged to the hilt.

belleislerunner · 07-12-2016, 07:41 PM

It also is dependent on who one chooses to marry. If one makes 150K and has a stay at home spouse, that home price is going to be around 300-450K. Or two working together at 75K each. If two each make 150K - suddenly you can afford up to 900K in home. So it really is dependent not only on what you make, but whether you marry up or down (from an earnings perspective).

DTWflyer · 07-12-2016, 08:40 PM

Right I understand that and it all makes sense. I get the household income, but I'm honestly surprised there are that many that can afford such.

The big publicly traded companies, the Fortune 500s primarily in automotive OEM, automotive suppliers, banking, and others in Metro Detroit pay good money in management positions but they don't pay sky-high amounts. The vast majority of Manager/Director levels in the fortune 500s top out in the mid-upper 100s. Only a subset make more than $200K, and we are talking about VP and above that do so. Most of these positions are held by people in their 40s, 50s, 60s. These aren't held by 20 & 30 somethings.

Privately held companies, and equity holders in family businesses can make much much more. 2-household doctors and attorneys come to mind as well.

I know many 30 something couples that make combined $200-300k, but they are all buying sub-$500K houses. Granted I think they are more of the financially conservative type and aslo realize the personal sacrifice it takes in the long term to raise children in a 2-income household where both people work 60+ hour workweeks to each make $120-150K each.