As Michigan Home Prices Grow, So Do Affordability Concerns

Michigan truly has something for everyone. With more than 100 state parks and recreation areas, 11,000 inland lakes, and 13,000 miles of hiking trails, it’s an ideal place for nature lovers.

The state is also home to Michigan State University and the University of Michigan, drawing students and college sports fans alike. Both GM and Ford are headquartered here, and other popular industries include military, aerospace, and mining. Plus, Michigan residents get to enjoy the beauty of all four seasons, from the summer heat and fall foliage to the winter snowfall. But homeownership here also comes with its own unique set of challenges.

Housing prices in the state rose six percent between June 2019 and June 2020, from $181,235 to $192,104. And in Metro Detroit, which has undergone a commercial and cultural renaissance in recent years, the contrast was especially stark. In March, as coronavirus lockdowns began, the city experienced a 61.8% decrease in home listings, more than any other city in the U.S. However, pent-up demand after restrictions were loosened led to a huge surge in sales: a massive 114% increase from May to June of 2020, and up nearly 15% from the same time in 2019. The median home price in Wayne County, where Detroit’s located, also saw the biggest year-over-year jump of any county, rising 11% to $160,000.

High Demand, Low Supply

Western Michigan has experienced slow but steady growth since the 2008 recession. Homes in Grand Rapids are now 90% more expensive than they were back then, and the average home price in Kent County as a whole is around $262,000. And in southwest Michigan, the market has been on fire. September of 2020 saw 518 closings, a number not seen since January of 2005. What’s more, sales were up 49% from last September, and the average price was $316,525 compared to $241,620—a 31% increase.

In the northern part of the state, a popular region for vacation homes, both purchases and sales have grown nearly 10% in the past year, at least partially as a result of the pandemic. The median home price is much higher here than elsewhere as well: $428,581 in Northwestern Michigan as of August 2020. 

“I think we offer a really great environment here in terms of feeling like you’re a little more spaced out than you are in a city,” Chrissy Ingersoll, a real estate agent with RE/MAX Bayshore, explained to C&G Newspapers. Many Michigan residents are following the national trend of more space, more peace and quiet, and fewer people, according to local real estate agents.

“People are thinking, ‘Hey, if we can buy a place and work from home with our phone and computer, what the heck. It‘s a better lifestyle up here and we can worry less,’ ” agent Pat O’Brien told the Detroit Free Press.

Read, “Should You Use Your Home Equity to Buy a Second Home?“

However, as a result of this high demand, the area is experiencing issues with low inventory and lengthy delays with construction projects. Currently, the bookings in these vacation areas go as far as two years out, and many builders aren’t even accepting any more requests for new projects at the moment.

Shifting Financial Priorities

That’s not the only challenge. The COVID-19 pandemic has affected the Michigan job market significantly, with economists predicting two more years of increased unemployment. In turn, this raises concerns about the ability of out-of-work homeowners to keep up with their mortgage payments and mounting day-to-day expenses. 

At the same time, for those staying put in their homes, there’s a desire to complete improvement projects.

“The money they might spend on a trip to Europe is being used for remodeling the kitchen, bathroom, or living room,” Janet Chambers, Executive Officer of Home Builders Association of Northern Michigan, told the Manistee News Advocate.

Are you a current Michigan homeowner who’s hoping to access your home’s equity to pay off debt, fund renovations, or cover educational expenses? If so, Hometap may be a good solution, as it allows you to receive up to $600,000 in cash without the hassle of a loan or monthly payments.