Nationally the housing industry has been cited many times as being a key element in the economic recovery of the nation. Housing is a powerful economic driver, not only because it is a basic human need but because housing and home ownership are part of a very large system of goods and services.
In the northwest Michigan economy, the housing industry is often listed as the third largest economic driver behind agriculture and manufacturing. A vibrant housing market impacts business and services that many people would not think of initially when the transaction process occurs. This impact spreads across all sectors: private, public and non-profit, all of which play some role in the process.
This last calendar year has been a particularly strong one for the real estate market in the region. In fact when viewed as a part of a seven-year cycle that began at the highest of the high points (2005) in the housing bubble, included the lowest of the low points at the bottom of the market trough (2009) and the climb out to the current 2012 market, the picture is very clear: the recovery is over and the market is back.
If market projections in 2002 were to have been established indicating conservative market growth, and we could somehow forget the top of the bubble and bottom-of-the-trough outliers, then what we would see today would have been a sensible growth rate occurring over that 10-year window.
While it may seem facile now to make these observations in light of the actual events of the past decade, what emerges from this picture is the fact that housing values have remained relatively intact, except for this rather volatile period. Housing still remains one of the best investments for not only the individual, but also the regional economic community at large.
Statistically speaking, in September 2009 the median home sold price for the five-county Grand Traverse region was $136,000. In September 2012, this median sold price was $165,000. Other key performance indicators are the number of days on the market, housing stock inventory levels and number of units sold, which were 97 units and 148 units respectively.
While a five-year rash of foreclosure and short sale activity had both positive and negative effects on the marketplace, the levels of this activity have been abating over the last year. As these properties disappear from the marketplace, two things are happening that will drive housing stock values: diminishing inventory of these below market value-priced properties and a stabilization of comparative market data.
Other side benefits to diminishing foreclosure/short sale activity is that derelict housing is being purchased either by homeowners or investors and improvements are being made to these properties. Also, these properties are returning to the tax rolls and as such are creating economic benefit to our struggling, budget-strapped local units of government. Banks are also benefitting as these negative assets are removed from their balance sheets.
So the big question on everyone's mind these days is, "Will this housing recovery last?" Answers to this run the gamut, from wildly optimistic to a fear of a return to recessionary market conditions and another tsunami of foreclosure activity.
Two things that need to be considered for our region will help our local housing market be resilient. One, remember where we are and who we are. This is a highly desirable location to many people at many different levels of income, so diversity in housing stock and common-sense pricing will keep the market strong.
Second, regional housing is only a part, albeit a major part, of a total system. How housing stock, type and value is connected to transportation, energy, natural resources, food and other economic drivers will be crucial when it comes to making a difference to our future economic outlook. Fortunately much of this discussion and understanding is being addressed through conversations and tangible collaborations through citizen-led efforts like the Grand Vision.
Kimberly R. Pontius is executive vice president of the Traverse Area Association of Realtors.