Housing values still lag
For most of the state, home values are still well below pre-recession levels. Only in a few areas have residential values climbed above those seen in 2008.
Source: Michigan Treasury Department
It promises to be a long slog before most Michigan homes return to their value before the Great Recession of 2008.
But the wait is over in a few, lucky pockets of the state.
Ann Arbor and some suburban areas of Grand Rapids are enjoying a robust recovery, according to statewide data on property assessments analyzed by Bridge. Overall residential values in those regions are above 2008 levels, when adjusted for inflation.
Also enjoying a residential recovery are two buzzy northern Michigan cities: Traverse City and Marquette. Though the gains aren’t huge ‒ at 6.6 percent for Traverse City and 4.4 percent for Marquette, after inflation ‒ few Michigan towns have seen home values rise above pre-recession values.
In the Grand Rapids market, buyers are putting down home offers sight unseen. Ann Arbor is so hot that sellers are getting multiple bids above asking price, real estate agents say.
An Ann Arbor home went on the market one recent weekend and garnered seven offers, four over asking price, almost immediately, said Nancy Merdzinski, CEO of the Ann Arbor Board or Realtors.
“The market is crazy,” she said.
Crazy good: Through the first six months of 2009, arguably the bottom of the housing market, the median sales price for a single family home in the Ann Arbor region was $178,400. By last June it had climbed 60 percent to just over $285,000.
Ann Arbor, along with East Grand Rapids and neighboring suburbs, are benefitting from the hottest economic regions in the state centered on education (University of Michigan, Grand Valley State University), strong gains in the healthcare sector and vibrant central cities.
“There are booming, thriving towns that are just doing great,” said Elliot Eisenberg, a national housing expert who has worked as an economist for the National Association of Home Builders.
10 towns with sharpest rise in home values
Only a handful of cities and townships have seen residential values climb above 2008 levels. Below are places with more than 10,000 residents with the biggest gains since 2008, when adjusted for inflation. (Number represents precentage change in residential real estate from 2008-2016)
- Lyon Twp: 23.5%
- East Grand Rapids: 14.4%
- Byron Twp: 10.4%
- Zeeland Twp: 7.4%
- Traverse City: 6.6%
- Ada Twp: 6%
- Caledonia Twp: 5.6%
- Ann Arbor: 4.5%
- Marquette: 4.4%
- Texas Twp: 4.2%
An uneven home recovery
Eisenberg said he is also well aware of the flip-side of Michigan’s uneven residential recovery: Communities where there are lower levels of education and professional skills are having a more difficult time lifting the housing market.
“If you have less education, less skills, less size, you’ve got a problem,” he said.
Unfortunately, that describes quite a bit of Michigan.
Take Oakland, Wayne and Macomb counties, the core of metro Detroit. In those communities where fewer residents have a college degree, such as Hazel Park, Southgate and Roseville, residential property values are still 40 percent or more below 2008 levels, even though home values in those places have risen each of the last three years.
Contrast that with the Detroit-area towns of Novi, Washington Township and Canton Township, where anywhere from a third to half of all adults have a college degree (well above the 27 percent of all Michigan residents 25 or older). Home values have risen more sharply, by 7 to 9 percent, on average, for the last three years. (All are above 2008 levels; Novi is 13.2 percent above, Canton Township 4.6 and Washington Township 2.6 percent.
Even so, the good news is that properties are recovering across much of Michigan, with new homes being built in some places. The problem is that they still have so far to go to return to their pre-recession levels.
The gains, more than 6 percent statewide in each of the last two years, will have to continue for at least several more years before they come close to 2008 levels, the highwater mark for most of Michigan’s cities, townships and villages.
Property values project
This two-part project on Michigan property values is one in an occasional series of news collaborations between Bridge Magazine and Crain’s Detroit Business. Other stories
All told, residential values, which account for three-quarters of all property in Michigan, are still 20 percent below 2008 levels when adjusted for inflation, according to the statewide data Bridge reviewed.
West Michigan, whose economy has recovered faster than the rest of the state, has seen strong growth, as have wealthier, more educated areas elsewhere.
But in huge swaths of Michigan, home prices have not come close to recovering and in several cities, demolition is more likely than new construction, as shown through dramatic swings in new housing permits. The permits topped out at about 50,000 in 2000, nosedived to 7,000 in 2009 and then spiked again to nearly 25,000 last year.
Aggregate home values in older, industrial, largely minority cities like Detroit, Flint and Ecorse are still far less than half of 2008, much of it due to foreclosures and abandonment that erased thousands of homes from the landscape and the tax rolls.
For those communities, there is little evidence of a recovery except in small pockets, like in the hot Detroit neighborhoods of Corktown, Midtown and the University District. According to data analyzed by the real estate web site Zillow, nearly 40 percent of Detroit homeowners still owe more on their mortgages than their homes are worth.
While that’s far better than the nearly 70 percent in 2011, it’s far higher that what’s seen around the state and region: Dearborn, at 61 percent in 2011 was at 14 percent in the third quarter of 2016; Kalamazoo was at 46 percent in 2011 and most recently was at 14 percent.
Many communities, like Wyoming and Kentwood in suburban Grand Rapids, Ann Arbor, Howell and Troy, were between 20 and 50 percent underwater on their home mortgages in 2011. All are below 5 percent now.
Heating up around Grand Rapids
For real estate agents in the Grand Rapids market, the recovery has become fast and furious: With an influx of new employers, like the data-center behemoth Switch, new money is coming in and the holders of that cash want homes. So when they come on the market, agents and buyers have to move quickly.
“You can’t drive fast enough to get to the house,” said veteran real estate agent and now broker Katie Karczewski of Keller Williams in Grand Rapids.
Some buyers are putting down offers on homes sight unseen; a recent home on the market for $325,000 got 40 offers in a single day.
The Grand Rapids market turned around in early 2015, Karczewski said. It had been a buyer’s market for several years after the Great Recession ended
Real estate prices were goosed by the growth in local business activity, spurred by growing local companies, the arrival of Switch and the increase in medical jobs in Grand Rapids, including the opening of Michigan State’s College of Human Medicine and the construction of an $88 million biomedical research facility.
For those Michigan communities not enjoying a boom market, Eisenberg recommended they need to tackle major issues before a full recovery will arrive
“You have to get rid of crime and you have to improve schools,” he said. “And you have to devote money to it. It takes 10 to 15 years.”
Older, inner-ring suburbs like Ecorse and Roseville around Detroit, and Muskegon Heights and Mount Morris outside Flint, struggle with some of the same issues as their bigger neighbors.
Buyers are far more likely to choose already-successful communities, like Ann Arbor and suburban Grand Rapids, yet the allure of urban living is driving only a few select markets,
“Everybody wants to be close to downtown,” said Merdzinski of the Ann Arbor Board of Realtors. “Everybody wants that Ann Arbor address.”
Unfortunately for the rest of Michigan, that’s only a tiny sliver of a very large state.