Nov. 12 (Bloomberg) -- Michigan’s blue-collar dream of owning a vacation home is going the way of the gas guzzler.
Thanks to a scaled-back auto industry and dwindling family incomes, northern summer houses for families in urban areas like Detroit and Flint are now the province of executives, professionals and business owners with more disposable income, said real-estate agents in one of the state’s recreation havens. It’s a reflection of a changing economy.
Sales have plunged along the Lake Huron shore, and on inland lakes and forests, with some prices dropping as much as 40 percent since 2008. Many homes had been built decades ago with auto-industry wages that exceeded the national average for manufacturing, and were handed down through families.
Those wages supported a lifestyle of multiple cars, recreational vehicles, college educations and second homes, especially for families with two paychecks that, in the 1990s, could each be $100,000 with overtime.
“Maybe they were upper middle class and didn’t know it,” said Craig McMurray, a real-estate agent and city councilman in East Tawas on Lake Huron’s southern Michigan shore. “They worked hard, played hard and they are a huge part of growth here in northeast Michigan.”
Michigan doesn’t keep data showing how many people own second homes, said Terry Stanton, a treasury department spokesman. Locals say auto-company retirees have become more prevalent as year-round residents on the eastern shoreline, with pensions and benefits better than those of new hires.
“That dream of the up-north cottage is much more difficult today,” McMurray said.
The 2009 bankruptcies and resurgence of General Motors Corp. and Chrysler Group LLC are emblems of a leaner economy, though the second-home market was spinning out of reach for blue-collar workers years earlier, said Kelly Dehner, a real-estate broker near East Tawas.
After the Sept. 11, 2001, terrorist attacks, auto workers flocked to buy second homes in case another attack threatened their city residences, Dehner said. A few years later, she watched workers weep as they sold because their paychecks decreased or disappeared.
“A vacation home is where you have fun, where families get together to forget their troubles,” Dehner said. “There are a lot of good memories there.”
The change reflects the waning economic clout of the Michigan-based auto industry. The share of U.S. vehicle sales by the three domestic automakers fell to 44 percent in September, from 64 percent in December 2002, according to Woodcliff Lake, New Jersey-based Autodata Corp., a research firm. The number of people who worked in vehicle and parts manufacturing in Michigan dropped to 116,300 in 2009 from 295,500 in 2001, according to the Ann Arbor-based Center for Automotive Research.
In all, Michigan lost 860,000 jobs from 2000 to 2009.
Its unemployment rate led the nation during the 18-month recession that began in December 2007, peaking at 14.2 percent in August 2009. That recession hit northeast Michigan’s housing market, where prices are starting to recover, according to real estate agents.
Since 2007, the United Auto Workers has agreed to let automakers hire workers who forgo traditional retiree health care, equal pay for equal work, job security and pensions in exchange for jobs that would have gone to Mexico or Asia. About 13 percent of GM, Ford Motor Co. and Chrysler Group LLC hourly workers, or 15,155 employees, now are entry level, and lack traditional union retiree benefits, according to the auto companies. Most of those workers make less than the $19.10 hourly average U.S. manufacturing wage.
At one Detroit-area General Motors assembly plant as many as half the workers are entry level at the lower wages, according to the United Auto Workers local there.
Scott Zimmerman, 41, works at a Lansing General Motors plant that assembles Cadillacs. Owning a vacation home isn’t within reach, even at his UAW top-tier wage of $28 an hour, he said. He said his grandfather still owns a lake cottage he bought more than 40 years ago when he worked at a Lansing plant.
“The banks aren’t loaning money like they used to,” Zimmerman said outside the plant where he works. His two daughters will attend college, Zimmerman said. “That’s tapping me out pretty good right there.”
Terry Towns, 58, said his pay at the Lansing plant is half the $80,000 a year he earned as a truck driver for GM parts in Flint. Towns transferred to the Lansing plant when the company’s 2009 bankruptcy cut his pay, and he lost the home he bought for $154,000 months earlier.
He said he can’t think about a second home.
“I went from $28 an hour on a Friday to $15 an hour the next Monday,” Towns said.
Those in the market will find good deals.
Five to seven years ago a cottage with 50-foot frontage on Lake Huron sold for $249,000 to $269,000. Now, the same place will fetch $179,000 to $199,000, said East Tawas real-estate broker Kimberly Lingo.
Sales of property purchased for hunting have fallen, too, Lingo said.
Still, some homes on prime lakefront cost hundreds of thousands of dollars, including a $1.3 million, 4,000 square foot property on Tawas Bay with bamboo floors, two fireplaces, attached garage, granite countertops and three bathrooms.
Reduced prices and low interest rates spurred David Peplinski, 48, to buy a house on Lake Huron near Oscoda. Peplinski, an information-technology specialist from a Detroit suburb, said his family for 15 years rented vacation homes and longed for their own as a retreat and investment.
Peplinski said he paid $162,000 for a two-bedroom home with a garage and 50 feet of a sand beach.
“We feel like we’re coming home,” Peplinski said.
Cheryl and Ed Sowa bought a retirement home in East Tawas three years ago. Both worked at General Motors.
Cheryl Sowa, 62, said as a young mother of three working at a Flint auto plant, she bought a cabin on an inland lake west of Oscoda that she sold when she retired.
Sowa said she’s aware that newly hired autoworkers are paid about half what senior UAW members make.
“That $10 an hour more could afford them a second home,” she said.
To contact the reporter on this story: Chris Christoff in Lansing, MI email@example.com.
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