Michigan is focused on regaining its reputation as an economic heavyweight and sociocultural hub in the U.S. The Detroit area was once the world’s automotive capital with manufacturers of cars and aftermarket products concentrated in this metro region. These industries have changed, but Michigan’s economic base, consisting mainly of manufacturing, agricultural production, and tourism, have buoyed the state’s fortunes and will continue to do so as the state undergoes a resurgence.
Overview of Economic Trends
In 2005, the state ranked ninth out of the 50 states in terms of gross domestic product or GDP. It is currently listed among the top 12 in terms of economic output, but local and state leaders are working on different initiatives to boost GDP even more. In terms of overall growth, the state is in eighth place based on numbers collated after the recession ended in 2009. This trend is bolstered further by dramatic changes in the unemployment numbers, dropping from 14 percent at the peak of the recession to a 4.8 percent jobless rate in February 2018.1 The state’s dependence on the auto industry has been mitigated as policymakers began pursuing initiatives to expand the manufacturing industry from one that was focused primarily on auto and auto-related production to one that draws high-technology businesses. The state also pushed for initiatives to support the growth of the services sector by boosting tourism.
These statewide numbers may not reflect the economic strength or challenges of local areas. Foreclosure proceedings, brought on by the financial crash in the mid-2000s, changed the face and the vibrancy of many neighborhoods.2 In some areas, homes were abandoned and blight set in. The geographic configuration divides the state into the Upper Peninsula and the Lower Peninsula. The local economy, social life, and quality of living vary in different parts of the state. This variance provides opportunity niches for those seeking to invest in the state’s real estate market.
The Case for Investing in the Wolverine State
The Midwest may not be the most popular place to move to partly because of extreme weather during the winter months. In addition, Detroit is still in the process of redefining and recapturing its cultural vibe. The heyday of Motown may be long gone, but this city is determined to reclaim its place as a music and entertainment hub. The state is also known for some of the most scenic coastal views and panoramic drives as you head from one end of the peninsula to the other.
In the U.S. News’ ranking of the nation’s best states, Michigan performs in the middle of the pack in spite of its challenges with the shifting tides in the automotive industry.
- Affordability – ranked fourth out of 50, placing fifth best in housing affordability and eighth best in cost of living metrics.
- Quality of life – ranked 29th overall, indicating acceptable assessments for social environment and state of the natural environment
- Economic outlook – ranked 22nd overall with growth, employment and the business environment rated positively.3
Best Places to Invest
Detroit
Discussions about this state inevitably begin with its most famous city, Detroit. This metro area has a population of 4.3 million with median household income estimated at $54,000, which is slightly under the national median of $59,000. However, the state is among the most affordable in the nation, with the median home price calculated at $69,000, and median rent at $892 per month.4
The recession affected the Detroit area dramatically, and large numbers of property owners faced foreclosure. Blight took over what were once thriving communities, but three of the state’s most influential families committed to revitalization projects in the downtown area. They have largely succeeded in transforming rundown areas into livable and welcoming neighborhoods and common areas. Aside from the Big Three, General Motors, Chrysler and Ford, many Fortune 500 companies have retained their corporate headquarters in the city.
In spite of these capital improvements, investors will still be able to find value-priced houses with built-in equity in Detroit and surrounding areas. A house purchased at the median price of $69,000, which is 63 percent below the national median home price, can be renovated as a rental. Fifty-three percent of the residents in the Metro Detroit area are renters according to the most current numbers from the U.S. Census Bureau.5
City leaders have offered various incentives for businesses to rediscover Detroit and for families to consider relocating. Unemployment is currently at 5.6 percent, and the job market is expected to expand by 1.8 percent, which bodes well for the city.6
Other reasons that enhance Detroit’s real estate investment viability are:
- Top 10 overall in construction job growth according to the Associated General Contractors of America
- $2.7 billion in new domestic investments by Ford, GM, and Fiat Chrysler in the early part of 2017 alone.
- Top 10 for tech jobs with technology workers earning 12 times more than the average amount paid for rent.
- Investors may qualify for the New Market Tax Credit, which is intended to draw small businesses to Detroit. Under this program, tax credits amount to 39 percent of investments. What it does is give tax credits for up to 39 percent of capital invested in areas classified as socioeconomically depressed.7
Lansing
Lansing is the capital city but not the seat of the state government. It is considered the fifth largest city based on population and may be referred to as Mid-Michigan. The city is home to at least five colleges. The median price for residential real estate is $107,743.8
Grand Rapids
The average home price in Grand Rapids is $245,963 with a one-month inventory.9 Median prices may be higher here than elsewhere in the state because of the tight supply situation and high demand. This is a situation that will benefit the savvy investor who can find properties priced at a discount for various reasons. This is the second largest city, and it is located only 30 miles from Detroit. It is home to at least five furniture manufacturing companies, and its location along the Grand River provides sweeping water views along with access to water sports in the summer.
Kalamazoo
The median home price in Kalamazoo is $243,682, which may seem high compared to the median price in nearby regions.10 The city placed 10th in the Nerdwallet’s list of 10 Best Cities for Work-Life Balance. Kalamazoo is home to at least three colleges, a number of breweries, distilleries and flavoring manufacturers along with technology and hard-goods manufacturers.
Michigan’s housing market is poised to take off as development projects and public-private initiatives push for redevelopment and revitalization. Be part of the growth and revival by putting your investment dollars where they are bound to generate a solid payback. Browse a listing of at least 800 available properties at Auction.com to stake your claim to the untapped potential of real property investments in Michigan.
Sources:
1 Is Michigan Back As a Top 10 Economic Player? Depends on the Metric
John Gallagher – https://www.freep.com/story/money/business/john-gallagher/2018/03/30/michigan-economic-status-top-10-player/469047002/
2 Historical Data
Isley, P., Ph.D., & Rotondaro, G., M.U.P.D.D. (2012, February). The Michigan Historical Residential Foreclosure Data Project. Retrieved November 7, 2018, from http://johnsoncenter.org/wp-content/uploads/2014/06/Foreclosure-report.pdf
3 U.S. News Ranks the 50 States
https://www.usnews.com/news/best-states/rankings
4,5 Reasons You Should Invest in Detroit
https://mousaahmad.com/5-reasons-you-should-invest-in-detroit/
5,6 Detroit, Mi | Real Estate Market Statistics & Trends 2018
https://www.realwealthnetwork.com/markets/detroit-michigan/
7 Michigan
http://nmtccoalition.org/michigan/
8,9,10 Michigan Real Estate Market 2018: Can You Make Money Investing Here? | Mashvisor
https://www.mashvisor.com/blog/michigan-real-estate-market-2018-make-money/
