By ZHOLDAS ORISBAYEV
Capital News Service

LANSING — Michigan builders are prioritizing the construction of higher value homes to gain more profit, a market-driven in part by the pandemic.

[This in-depth story was published in The Detroit News, Real Estate Voices US, Manistee News Advocate, and The North Power News.]

But the state lacks housing for moderate-income buyers, such as the workers who build the high-end homes, experts say.

“Some homebuilders in resort areas of Michigan, such as Emmet, Charlevoix, Cheboygan, Otsego and Grand Traverse (counties), are booked for two years ahead and they are not talking with new clients to create projects,” said Janet Chambers, ethe xecutive officer of the Home Builders Association of Northern Michigan.

Through July 2020, the average price for homes statewide was about $210,000, according to the Michigan Association of Realtors. That’s up nearly 10% from July 2019.

But the average price is quite different in resort areas in Northern Michigan.

In August 2020, the average selling price for homes in northwest Michigan’s Emmet County, home to Petoskey and Harbor Springs, was $428,581. That was up from $344,120 reported the previous August, according to the Realtors association. In the same month, 51 more houses were sold in the county compared with August 2019.

“House inventory is extremely low as homebuilders are behind in their projects while the trend in moving from urban areas is rising,” said Bernie Schaffer, a chief real estate agent of the Harbor Springs’ office of Harbor Sotheby’s International Realty agency. “Harbor Springs schools have received 100 new students this year, which is unusual.”

The coronavirus pandemic and statewide lockdown created a reverse trend of moving people from urban areas to rural areas as they adapted to work remotely, Schaffer said.

“Some homebuyers, especially from California and Texas, are offering more than the asking price as there are not many houses for sale,” Schaffer said. “I have never seen such a rate of booming real estate in 30 years of my professional career.”

Schaffer said that most of his clients are looking for houses in the price range of $400,000 and $900,000.

“Houses were not staying more than two days in a market as demand is extremely high,” he said. “Some of my clients wanted to buy houses, which are below $200,000, but there are almost no offers in the affordable housing market in Emmet now.”

About 25% more houses were sold in Emmet, Charlevoix and Cheboygan counties this August compared with August 2019, according to the Realtors association. But the number of houses listed as for sale decreased by 44% in the period.

“The coronavirus pandemic has been affecting home builders, but we haven’t seen a decline in home sales as more interests are coming from out of state and, even, out of the country,” said Kimberly Pontius, the Traverse Area Association of Realtors’ chief executive officer.

Pontius said that there is a high level of demand for homebuilders in Grand Traverse County and they are well beyond their capacity.

“If you want to build a home today, most of the homebuilders in the region can start it in two years,” he said.

“Cost of construction materials has gone up rapidly due to supply chain difficulties in the pandemic, and wildfires in California are among the reasons for the increase in prices, too,” Pontius said. “All these affect home prices in our market, and the cost per square feet of land is following the same trend.”

“Homebuilders in Northern Michigan are swamped with work as their projects were shut down for several months due to the coronavirus lockdown,” said Janet Chambers, the chief executive officer of the Home Builders Association of Northern Michigan.

People spending more time at home are paying more attention to home improvements, she said

“The money they might spend on a trip to Europe is being used for remodeling the kitchen, bathroom, or living room,” she said.

At the same time builders are struggling to find construction workers, Chambers said.

A shrinking population under the age of 35 and a lack of affordable housing for them are among the reasons for that.

Average lumber prices have increased by more than 170% since mid-April. That added more than $16,000 to the typical cost of a new single-family home, according to data from the National Association of Home Builders. The increase has priced more than 2.1 million U.S. households out of the market for a median-priced new home.

“Homebuilders are prioritizing to build higher value properties to gain more profit margins, but the state has had a lack of workforce housing for moderate-income buyers,” said Katie Bach, the Michigan State Housing Development Authority’s communications director.

Housing for workers and other moderate-income buyers is not a priority because builders “cannot make enough money due to rising construction costs,” she said.

The authority is designed to help low-income residents buy houses. The program, which started as a pilot, facilitates and encourages the construction of modular housing units at an attainable price point, which is typically below $200,000.

In September, the Michigan State Housing Development Authority Board permanently established the MSHDA MOD Program with a funding allocation of $2 million for the 2020-21 fiscal year.
Those interested in learning more about what the state offers, including up to $7,500 in down payment assistance for first-time buyers, should visit here.