Michigan Home Permits Hit a 10-Year High, But It’s Not All Good News

March 24, 2017

Michigan is building itself back up after the recession, but it may not be completely smooth sailing.

Over 98% of all privately-owned residential buildings are constructed in permit-issuing locations, and across the state of Michigan, a total of 15,176 new home construction permits were issued last year. Local home builders and many buyers are pleased, considering that number represents an 11.7% increase from the previous year alone. But while this total is the highest it’s been since 2006, it’s approximately 1,700 permits short of the number predicted by the Home Builders Association of Michigan at the beginning of last year.

Still, they acknowledge that the significant increase is mostly good news for Michigan.

Bob Filka, CEO of the Home Builders Association of Michigan, said in a release, “We are most pleased to see real growth, which is good not only for our home builders, but also for local communities and schools that depend on the revenue generated by new construction.”

The association estimates that around 16,515 single-family home permits will be issued throughout Michigan in 2017. If achieved, that number would represent an 8.8% increase from this year’s high.

The steadily increasing number of home permits indicates that Michigan’s housing market is also experiencing a major surge. But some experts worry that there may be a downside: middle-class home buyers may be priced out.

Of the 35.9 million people who moved between 2012 and 2013, 48% did so for a housing-related reason. But the housing shortage across the state has resulted in stiff competition for home buyers, leaving few options in mid-level price ranges. And even though the number of homes available continues to rise, the average price of a new home was $154,133 last year. That number increased by 5.8% from the previous year, and it represents the highest price since 2005.

Filka noted, “The increase in home sales prices is good news for homeowners seeing their values coming back after being beaten down during the recession. It is also a bit of a double-edged sword in that rising costs are starting to price many middle class families out of the housing market, which is something we all must be concerned about.”

Home builders need to be able to make money on a property, but increasing housing prices are a widespread problem that needs to be addressed. Last month, HBAM officials met with members of the Michigan community to discuss the ongoing issue of affordability.

Executive Vice President of the Home Builders Association of Michigan, Lee Schwartz, stated, “Right now, about 1.8 million families in Michigan can’t afford a house over 150,000 dollars. Another eight million can’t afford a house over 250,000 dollars. We are now getting to the place where the average new home is running 350-380,000 dollars to build, and that’s just unsustainable.”

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