Michigan is in the midst of a real estate market rebound, with only six other states and Washington D.C. seeing larger increases in home prices over the past five years, according to a report from theFederal Housing Finance Agency.
Washington D.C. had the largest average home price increase from 2010 through this past August, followed by Nevada, North Dakota, California, Arizona, Colorado and Florida.
The rise in real estate prices compared to their Great Recession low point translates into higher property tax collections by Michigan's state and local governments. Local governments rely heavily on property taxes to fund their operations, and a state education property tax is a key revenue source for public schools. Higher sales prices mean higher property tax assessments, and that means higher revenue for governments.
Property selling at higher prices also increases the revenue collected by the state under a 0.75 percent real estate transfer tax ($3.75 per $500). In the last fiscal year, Michigan collected $235.8 million from this tax, 18.7 percent more than the previous year. Revenue from the tax goes to public schools, state colleges and state universities.
Greg Moore, a real estate broker in Livonia, said that Michigan's ranking in the federal report is a bit misleading because the state had to climb out of a deeper hole than most others.
“Because Michigan lost so much value from 2008-2012 (up to 70 percent in some areas), the gains seem that much greater,” Moore said in a message. He said 2010 was the bottom of the real estate market in Michigan.
“And that bottom (for Michigan) continued through until the spring of 2012,” he said.
Gary Reggish, the president-elect of Michigan Realtors, said he wasn’t surprised by Michigan’s ranking. He said property values were hit very hard in this state during the Great Recession and some areas had a decline of as much as 70 percent in property values.
He said with an improving economy, housing prices will go up. Reggish said there are still homeowners who are “underwater” on their mortgages — they owe more than the house could be sold for — and that fact is holding down the supply of houses coming onto the market. But, he said, historically low interest rates have kept demand high.
The Federal Housing Finance Agency described its methodology: "The HPI is a broad measure of the movement of single-family house prices. The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975."