Just a decade ago, the Detroit metropolitan area, a region of nearly five million people, lay in shambles. Entire neighborhoods had succumbed to default due to predatory loan practices that left homeowners unable to make their mortgage payments. When the housing market crashed in 2008, other homeowners simply walked away from loans where what they owned was many times the current value of their homes. Detroit became a no man's land of deserted properties and stolen dreams.
Fast forward to 2021, and while the Michigan real estate market is still in recovery mode, it is rebounding and presents excellent opportunities for savvy real estate investors, thanks to a thriving rental market and continuous urban renewal projects. It's a good time to be a real estate agent in Michigan. The average price of a home here was $213,961 in December of 2020, a 12.98% year-over-year increase from 2019. For individuals who want to live in a solid family community, Michigan offers great value, particularly in Grand Rapids and the western suburbs of Detroit.
US News and World Report ranks Michigan 14thamong the 50 states for opportunity; its economy is 19th in the nation. Programs like the Michigan Community Revitalization Program promote renovation and redevelopment of properties in traditional downtowns and high-impact corridors, further incentivizing the purchase of brownfield and historic preservation sites.
However, the Michigan real estate market faces ongoing challenges. Michigan's post-COVID economic recovery lags behind other Midwestern states, and the unemployment rate at the end of 2020, 7.5%, is higher than the national average. Michigan's future depends on continued investment in urban areas and robust federal assistance to help offset the cost of these revitalization efforts.
Fastest Growing Real Estate Markets in Michigan
1. Grand Rapids, Michigan
Grand Rapids, located near Lake Michigan in the western part of the state, has one of the hottest real estate markets in Michigan. Niche ranks this city of nearly 200,000 residents 39th on its list of Best Cities to Buy a House in America. It has decent public schools and great diversity. The median sale price is $200,000, an increase of 14.1% year-over-year.
2. Wyoming, Michigan
A suburb of Grand Rapids, Wyoming receives an overall grade of A-from Niche. It has good public schools, nightlife, and diversity. This town of just over 75,000 residents also has one of the most competitive real estate markets in the state. Properties typically remain on the market less than a week, and 68.6% of them sell for above listing price. The median sale price is $185,500, up 16% year-over-year.
3. Livonia, Michigan
Livonia is an affluent suburb of Detroit with good public schools, low crime, and ethnic diversity. Most of the residents here are homeowners. The median sales price of a home here jumped an impressive 20.3% year-over-year; currently, the median home sale price is $250,000. Homes remain on the market an average of 12 days, and hot homes may receive multiple offers and bidding wars.
4. Ypsilanti, Michigan
Located just east of Ann Arbor, and home to Eastern Michigan University, Ypsilanti is a Detroit suburb with room to roam. Niche gives it an overall score of B, affording Ypsilanti high marks for diversity and nightlife. The median home price here is $205,000, a 5.2% year-over-year increase. Properties remain on the market for 38 days, and 34.7% sell at higher than list value.
5. Troy, Michigan
Niche ranks Troy, a commuter suburb of Detroit, the best place to live in the Detroit area. It receives a grade of A+ and scores high in nearly every important quality of life category, with excellent public schools, great nightlife and diversity, and low crime. The median sale price in Troy is $320,000, representing a 21.7% year-over-year increase. Homes remain on the market for 26 days, and 19.7% of the properties sell for above listing price.
6. Flint, Michigan
Flint's economic troubles began when General Motors began to withdraw its presence from the state; more recently, the city has been in the national spotlight due to dangerous levels of lead in the drinking water. Despite its woes, the central Michigan city has a booming seller's market. The median sales price of a home, $82,000, jumped 126.2% year-over-year. The average home sells for 3% under asking price and remains on the market for 18 days.
7. Saginaw, Michigan
Saginaw is a small city in the Great Lakes region with a sparse suburban feel. Like Flint, it is a former manufacturing city struggling to come to grips with declining industry The median sale price of homes in Saginaw jumped 25% year-over-year, but it remains affordable at $121,250. Homes remain on the market for 17 days and sell for approximately 3% less than the listing price.
General Statewide Trends
Booming Rental Market
Although Michigan's economy has been hit hard by COVID-19, there are some encouraging signs that the state's real estate market is fundamentally stronger than it was a decade ago, when the economic crash caused home sales to plummet. During the pandemic, home sales rose dramatically in many markets; cities like Saginaw, Detroit, and Flint have seen giant increases in the median sales price year-over-year. The increases have been fueled by investors seeking to capitalize on the booming rental market, particularly in the greater Detroit metro area.
Tight inventory is an issue nationwide, and just as elsewhere in the country, Michigan's most sought-after markets have few available homes. Affordable homes are in particularly short supply. The average price of a new build is $330,000, meaning that there is a real shortage of entry-level homes in new developments. Although there is a will to build affordable housing in the state, right now inventory continues to be tight in this key demographic, a problem creating brisk seller's markets in the Detroit and Grand Rapids's metro areas.
There are competing stories of affordability in Michigan. Even in highly competitive markets like Grand Rapids and its suburbs, homes are affordable when compared to prime real estate markets elsewhere. At the same time, Michigan has been harder hit by COVID-19 than other parts of the country and has higher unemployment rates. The 12.98% year-over-year increase in the average sales prices of homes state-wide means that many families are being priced out of the market.
With a median home sale price below the national average, you get a lot of bang for your buck in Michigan, and there is a thriving rental market to facilitate cash flow. At the same time, paradoxically, there is a lack of affordable housing in the state, particularly in new construction starts. The increase in home sales statewide is largely the result of investors driving up home sale prices in parts of the state that are still feeling the loss of twentieth-century manufacturing jobs.
Whether the seller's market will persist throughout 2021 may be linked to whether Michigan receives the funding it needs to invest in communities that were devastated in 2008 and have not yet completely recovered. Right now, there are positive signs, but real estate analysts are unsure what the future holds for the Wolverine State.