If you value lifestyle in combination with an appreciation profile, there just might be a place in your portfolio for a Northern Michigan vacation home that makes financial sense. Vacation home prices typically lag major market residential rates by 12-36 months.
But with asking prices for Northern Michigan waterfront and ski-proximate real estate up 10 percent to 20 percent this year (based on 24 months sold price per sq ft averages), discounting has not hit our market.
While the obligations and negative cash flow aspects of ownership can sometimes be burdensome, the numbers still work as illustrated on our Investment Performance page. Now is the time to explore the pluses and minuses of buying a Northern Michigan vacation home property as it fits your particular situation.
Learn more about investing in the Northern Michigan real estate market, or explore Northern Michigan communities now and plan your next investment.
Understanding the Northern Michigan Real Estate Market
Whether you’re looking for the convenience of ski-in/ski-out lodging near lifts or the style and privacy of a single-family home, we can help you understand what Northern Michigan real estate has to offer. Strategic positioning and the economic drivers of real estate should be your first consideration. Why? Because a misguided strategy perfectly executed still produces a misguided result.
Some of the questions you should be asking:
- “When will I be there?”
- “How long will I stay?”
- “Will I be a vacationer, semi-retired, or do I plan to be a resident?
A general rule of thumb is the shorter your stays, the more important location becomes. Start by narrowing your search down to the type of property you are interested in and the location you like best. Do you want a condo near skiing or a house with a private beach?
Northern Michigan is home to Boyne City, Harbor Springs, Charlevoix, Bay Harbor, Traverse City, Petoskey, and many other places – explore and find where is best for you. Take your time and consider your plan before making any binding decisions.
History & Market Trends
Data analysis confirms that we are certainly past the bottom of the longest-lasting downturn since the Great Depression.
Vacation homes typically lag major market residential by 12-36 months and with asking prices for Northern Michigan real estate up 10%-20% (based upon 24 months sold price per sqft averages), the past four years of heavy discounting is now over.
Learn more about the Northern Michigan real estate market below, or connect with Brook Walsh today for trusted guidance with your next investment.
During the worst of the Great Recession, prices dropped by about 20% from high water mark 2006/7 valuations but have since rebounded, cutting that loss gap in half.
Looking forward, our most immediate concern is a fading buyer window which is probably already over for reasons too complex to address efficiently.
A recovering price structure in combination with unsustainably low-interest rates means that the cost of ownership may never be lower; it's just hard to know how long discounted pricing and the artificially manipulated FED cost of funds will last.
July is the height of our inventory accumulation cycle with most if not all of the well-priced properties selling to a more confident buyer base.
With the stock market indices setting record highs, investors have been reluctant to redeploy capital but this will probably change as returns slow down and profit-taking occurs due to trading range consolidation. Momentum driven exuberance is bound to fade if top-line performance continues to stagnate, paving the way for alternative asset class investments.
The good news is that increased confidence in net worth and employment income have historically driven demand for high-end luxury goods spending. In combination with baby boomer demographics, a highly affluent customer base, the stage is set for the return of our long term 5% rate of appreciation, supporting the premise that you can have fun and make money if you know how to go about it.
Consumers continue to struggle with the idea of high-end luxury good spending, much less an extravagant Northern Michigan property, in these volatile and still uncertain economic times. Why should such an idea even be considered when frugality and de-leveraging are all the rage? Financially savvy consumers intuitively understand timing and the scarcity of unique assets; knowing that prices are down, the cost of capital is at record lows and windows of opportunity short-lived.
The stock market continues to be riddled with insider trading scandals, bonds are poised for massive losses due to Federal Reserve manipulated interest rates, and with cash-paying, almost nothing why not consider an asset class that can deliver an immediate lifestyle dividend in combination with a history of reliable and likely to continue long term appreciation?
The big story for the next couple of years is going to be the lack of available inventory. Best buy opportunities are still out there but not as plentiful as one might think. Six years of market illiquidity should have produced plenty of supply as sellers waited for market conditions to improve, which they have, but the exact opposite has occurred. Maybe prices aren't yet high enough or perhaps potential sellers think of their Northern Michigan property as a family legacy asset, but no matter the reason they're just not selling. Supply vs. demand ratios hasn't been this low since 2006.
Browse Northern Michigan communities now, or register with Brook Walsh Home Search to be notified when new listings become available! For trusted guidance when investing in Northern Michigan real estate, connect with Brook Walsh today, or call 231-459-3179.
Finding A Good Deal in the Northern Michigan Real Estate Market - Can a good deal still be found?
If you know how to go about it. Finding a good deal requires patience, perseverance and an in-depth understanding of relevant valuation metrics, but if you actively engage in the process there will be opportunities.
A typical example would be a buyer interested in a family home:
- With 4+ bedrooms;
- Located within a 5-10 minute drive of the chairlifts or sandy beach;
- Purchase price not to exceed $2 million;
- Short term rental income offsets;
- Upside appreciation profile.
A search produces 40 results from which a shortlist of best fit properties is selected. Candidates cannot suffer from pricing defects, environmental defects or shell and core/floor plan defects. The top 25% of the results yields 10 possibilities that make the final cut.
Experience suggests that only 2 of the presented homes are likely to be of serious interest which is a small fraction of total inventory. The challenge here has to do with statistical probability: The odds that one of the two shortlisted properties is owned by one of five price realistic sellers is only 10% (2/10 x 5/10 = 10/100) making the chances of a successful acquisition both frustrating and alarmingly challenging.
So much for buyers who think they are going to get the deal of a lifetime, from sellers who are patiently willing to sell, on the one day that buyer happens to be in town looking at real estate.
Data research, shows the following to be true:
- The Northern Michigan property market is at the end of a 10-year structural correction cycle.
- Leading Indicators show inventory levels at below long term absorption averages.
- Capital markets are improving as a result of the biggest stock market run-up in modern economic history.
- The demand for high-end luxury goods is up.
- Consumer confidence and GDP performance are strengthening and a favorable FED monetary policy is in place.
- Well-priced vacation homes have been selling but buyers are still reluctant to commit.
As the fear subsides there will be an increasing appetite for yield and diversification ultimately bringing an end to the current capital preservation mentality.
All of these indicators support a "take action now" strategy with the key being to get out in front of the herd while there are still deals to be had, the worst is over, but the stampede towards freer spending has not yet begun.Posted by Brook Walsh on