Small Midwestern cities dominate hot home markets — and Ann Arbor’s is downright ‘scary’

In late February, a 4,000-square-foot home on the east side of Ann Arbor listed for $850,000. Barely three weeks later, the house had sold for $1.1 million, a roughly 30% premium.

Such activity is becoming the norm in the Southeast Michigan university town’s competitive housing market, which was recently named one of the nation’s leading housing markets in the country, according to a report by the Wall Street Journal and Realtor.com.

The report — which looks at myriad factors ranging from the overall real estate market to economic health and quality, as well as overall demand — ranks Ann Arbor as the third hottest housing market in the country, just behind Rockford, Ill., and Canton, Ohio. The Lansing-East Lansing area also made the list, coming in at No. 20. 

The new report aims to put a spotlight on “housing markets that offer shoppers a lower cost of living, including for homes, and thriving local economies that are attractive, but not too crowded.”

 

A combination of affordability and climate resilience helped put markets such as Rockford and Canton at the top of the list, as Crain’s Chicago reported earlier this week. 

But, there’s a key difference between Ann Arbor and the two markets ahead of it on the report: affordability.

The median home price in Ann Arbor, as determined by the Realtor.com/WSJ report, stands at $525,000, far outpacing the median price throughout the rest of the country of about $417,700, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

By contrast, Rockford — northwest of Chicago — and Canton — south of Cleveland — each have median prices below $250,000.

“I worry about affordability” in Ann Arbor, said Martin Bouma, president of the Bouma Group, an Ann Arbor-based affiliate of Keller Williams Realty.

“The problem is we’re seeing crazy activity,” Bouma told Crain’s, noting that buyer’s agents in his office are routinely writing multiple competitive offers each week and still losing out. “It’s a little scary.”

Smaller ranch houses in the city that might have once sold in the $300,000-$400,000 range are now going under contract within days of hitting the market and fetching $500,000 or higher, Bouma noted. Much of the activity can be attributed to the expanding presence of the health care sector in Ann Arbor, overall growth of the University of Michigan and the notion that the city’s economy is seen as more immune from recessions when compared with the auto-heavy Detroit suburbs. 

Ann Arbor, Bouma noted, has shifted in recent years from more of a “hippie, artsy community” to a “more bougie type area,” sparking concern over where more working-class people — nurses, teachers, firefighters — might live.

“You can’t buy a single-family home in Ann Arbor for under $300,000 unless it needs a ton of work,” He said.

Despite those concerns, Bouma said activity at his brokerage remains robust, particularly as it focuses on listing homes, and that overall volume is up about 28% so far this year.

The aforementioned home in Ann Arbor that sold for nearly 30% over asking price back in March, over $1 million, is increasingly far from an outlier in the area. As Crain’s has previously reported, between 2018 and 2022, homes in the city selling for more than $1.5 million have surged, growing more than five-fold.

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