Hamptons of Michigan Draws New Yorkers With Bargain Homes

The parking lot at Bob Sutherland’s Cherry Republic eatery and gift shop in Glen Arbor, Michigan, has been dotted in the past several months with license plates from New York, Pennsylvania and Washington, D.C.

Towns such as Glen Arbor along Michigan’s northwestern Lower Peninsula shoreline have long drawn tourists from Chicago and affluent automotive-industry executives from metropolitan Detroit, 280 miles (450 kilometers) to the southeast. The addition of New Yorkers and others from farther afield is a noticeable change, said Sutherland, who has run cherry-themed stores in the area for the past two decades.

“We really feel like there’s an influx of newbies,” he said. “It is surprising, the amount of attention we’ve gotten on the East Coast. The New York Post just did an article on us.”

A surge in tourism from visitors outside of Michigan is helping increase demand for vacation houses in the region, where the median home price is about a quarter of that in the Hamptons, the summer retreat on New York’s Long Island. Local property prices in the first half of the year rose twice as fast as in all of the state, and real estate values are propping up debt ratings for Glen Arbor, Harbor Springs and other nearby cities.

Out-of-state customers at lodgings in the area rose 32 percent during this year’s warmest months, according to data from the Traverse City Conventions & Visitors Bureau. The number of visitors climbed almost 60 percent from New York and 29 percent from Texas, part of increased traffic from 34 states over last year, the data showed. The influx is likely to show up in second-home purchases in future years, according to local brokers including Megan Luce, who sells real estate in the area for Century 21.

‘Big Factor’

“The tourism is definitely a big factor in driving second- home sales,” Luce said. About 40 percent of her sales in the past year were for second homes, including one bought by a New Yorker, she said. “Most people who buy second homes have been vacationing up here and then decide to buy.”

Along about 200 miles of shoreline spanning from Crystal Lake to the far southwest and around to Harbor Springs to the northeast, where Lake Michigan heads toward Lake Huron, there are now 333 homes for sale at more than $1 million each, according to Zillow Inc., a Seattle-based real estate information provider.

In the five-county area surrounding Traverse City, about halfway between Crystal Lake and Harbor Springs, homes sold for $187,590 on average this year through July, up more than 10 percent from a year earlier, according to data from the Michigan Association of Realtors. That compares with a statewide average of $106,903, a 4.8 percent increase.

The Hamptons

By contrast, the median price for a home in the Hamptons was $850,000 at the end of the second quarter, according to a July 26 report by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. The luxury market in the Hamptons area, the top 10 percent of sales by value, had an average price of $5.1 million in the second quarter.

Buyers from outside Michigan are taking advantage of the Traverse City area’s relative affordability, said Randy Dye, a Realtor for Re/Max Bayshore Properties who recently sold two second homes to Texans seeking cooler summer lodging.

“I had Californians who purchased property in Michigan for $180,000 that was twice the size, with lower taxes and a much better home, for what they got in California for $300,000,” said the 67-year-old broker. “Overall, I’m having the best year I’ve ever had.”

‘Real Bargain’

The region may draw even more out-of-staters next year, said Brad Van Dommelen, president of the Traverse City visitors bureau, which promotes tourism in the area. The group this week is running five-second videos once every 15 minutes on two large electronic boards in New York City’s Times Square. The bureau also took out an advertisement in a travel guide that went out this past weekend to 112,000 New Yorkers with household incomes of more than $350,000, he said.

“We hear about people coming from the West Coast and the East Coast, and, for them, $1 million for lakefront property is a real bargain,” said Van Dommelen. He thinks of Michigan as “the third coast,” he said. “Recently, I saw license plates from 11 different states in one row. A couple weeks later, I counted 14 different out-of-state plates in just one line in a parking lot.”

Visitor attendance is on pace for a record this season at the nearby Sleeping Bear Dunes National Lakeshore, with its 300- foot-high (90-meter-high) sand peaks, after “Good Morning America” viewers selected the park as the “most beautiful place in America.” The region also made National Geographic magazine’s “Top 10 Summer Trips for 2012” and Draft Magazine’s “Top 3 Emerging Beer Towns in the USA.”

Capone, Hemingway

Michigan’s northwestern Lower Peninsula has a history of prominent vacationers. It attracted early industrialists such as the Gambles of Procter & Gamble Co. and the Upjohn pharmaceutical-making family. Local legend has it that gangster Al Capone had a place nearby. Ernest Hemingway’s family also had a summer home in the area, and one of his first published short stories was titled “Up in Michigan.”

More recently, chef Mario Batali’s boosterism for the region, including as a paid spokesman for Michigan’s tourism campaign, has helped raise its profile as an dining destination. Batali blogs about the region’s restaurants and spends part of the summer in Northport, where he bought an old fishing camp about 30 miles north of Glen Arbor on the Leelanau peninsula.

Madonna’s Family

Michigan native and pop singer Madonna’s family runs the Ciccone Vineyard and Winery in Suttons Bay, and Michigan documentary director Michael Moore has an annual film festival in Traverse City, which this year featured an appearance by actress Susan Sarandon.

The two-hour flight from New York’s LaGuardia Airport is often less of a hassle than trying to get from the city to the Hamptons, said Dan Searby, a New York-based executive-search consultant whose family, since 1940, has owned an 11-bedroom summer home in Northport, near where Batali has his fish camp.

Searby said his family’s home, bought by his grandfather, is in an area less affected by the out-of-staters who have made Harbor Springs, a cluster of multimillion-dollar dwellings 100 miles east, into the Hamptons of Michigan.

The influx of summer residents is helping lower municipal borrowing costs in the region, said Tom Richards, city manager of Harbor Springs, which is surrounded by some of the most expensive real estate in the region. Harbor Springs has about 2 miles of prime Lake Michigan shoreline and includes a bustling marina.

Borrowing Costs

Standard & Poor’s cites the $468,827 average for property holdings of city residents, including the value of second homes, in a May 2012 report outlining its AA+ credit rating for Harbor Springs. S&P also highlighted that the city gains more than 6,000 additional residents each summer.

The rating, the second-highest possible, gave the city lower interest rates for the $7 million needed to upgrade the local water system than if the city had a lower grade, Richards said.

The city’s popularity also is cutting into the year-round population, he said. Permanent residents dropped about 20 percent, to 1,194 people, as more houses are purchased as vacation dwellings, Richards said.

“We’re seeing some people buy ‘second homes’ for their second homes, to have places for friends and family to stay” during summer vacations, he said.

The affluence of summer tourists or the high market value of second homes is also reflected in the AA+ rating for Glen Arbor and the AA ratings for the lakeside communities of Charlevoix, Traverse City and Leelanau County.

Area Accolades

Praise for the region, which includes ranking among Midwest Living magazine’s “Top 5 Food Towns in the Midwest” and AOL Travel News’ “Top 10 Beach Towns in America,” may help push Sleeping Bear Dunes attendance to a record, based on the number of visitors so far this year.

The 1.35 million travelers in 2011 almost matched the 1999 peak of 1.36 million, and attendance through August of this year was up 22 percent from a year earlier, according to park data. Camping visits were up 20 percent from last year, and revenue from fees was up 40 percent, according to Phil Akers, chief park ranger.

Half a million people attended the National Cherry Festival that ran from July 7 to July 14, its organizers estimate. It’s the signature event for a region known as the “Cherry Capital of the World.”

Michigan produces about 75 percent of the U.S. crop of tart cherries. Sutherland’s Cherry Republic and other stores such as the Cherry Stop hawk wares made with the fruit.

Polish Cherries

A late-winter freeze crippled the local cherry crop this year, leading Sutherland to rely on produce from Poland to fill his orders. He flies a Polish flag at Cherry Republic and employees wear armbands with the Polish eagle emblem. Customers apparently don’t mind, as business has increased 15 percent this year at the Glen Arbor store, Sutherland said.

His restaurant, which used to serve only lunch, added dinner service and gets as many as 100 diners a night with almost no advertising, leading the business to hire additional workers, he said. Some nights, local restaurants fill every table, with people waiting.

“We’re up 15 percent,” Sutherland said. “And that’s just amazing because that’s continuous, year after year. We think we’re going to flatten out, but then we get some good press and we squeeze a few more people in.”

To contact the reporters on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Keith Naughton in Detroit at knaughton3@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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