Home Prices in These Midwestern Cities Are Outperforming New YorkKathleen M. Howley
Some of the U.S. housing recovery’s biggest price gains can be found in the Rust Belt, the swath of the Midwest devastated by decades of factory closings.
The median home price has surged 75 percent in the metropolitan area of Lansing, Michigan’s capital, in the past three years, according to second-quarter data from the National Association of Realtors. Prices in South Bend, Indiana, have jumped 47 percent, and the increase in the Minneapolis-St. Paul area is 42 percent -- more than double the gains of Boston, New York or Washington in the same period.
The growth of Silicon Prairie, a name used for parts of the Midwest’s technology sector, along with the automobile industry’s rebound are boosting housing demand in a region previously known for urban decay and population loss. The economic resurgence is giving some Midwesterners reason to stay put, said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago, who grew up in Michigan as the daughter of an auto worker.
“Our biggest export in the Midwest has always been our educated sons and daughters,” said Swonk, whose native state was hit hard by the U.S. foreclosure crisis. “The emergence of high tech and the comeback of the auto industry will keep more people in a region where affordable housing gives them a much better chance of buying.”
The fastest-growing states for technology jobs in the first half of the year were Minnesota, Utah, Nebraska and Michigan, according to the Bureau of Labor Statistics. Six Midwestern states had unemployment rates lower than the 5.3 percent U.S. average in June, led by Nebraska’s 2.8 percent, the lowest in the nation.
Increased hiring has sparked population growth in parts of the Midwest, reversing decades of outflows. The Minneapolis area gained 33,700 people in 2014, according to the Census Bureau. Lincoln, Nebraska, where home prices have risen 15 percent in three years, added 4,600 residents last year, and Indianapolis, with a 21 percent increase in prices, has 18,100 more people.
In South Bend, Indiana, where the median home price is $102,100, the population grew by just 268 people in 2014, but that was the largest single-year increase in more than two decades. With the addition of more than 1,000 jobs this year, the city’s unemployment rate dropped to 5.1 percent in June from 7.1 percent in January.
“I know people who grew up here, left to work in New York or Washington, and didn’t expect to come back because they didn’t expect the jobs to come back,” said Pete Buttigieg, 33, South Bend’s mayor since 2012. “They’re moving back, saying they couldn’t find the same quality of life they have here.”
A mile from the stadium where the South Bend Cubs minor league baseball team plays, abandoned Studebaker factories have given way in the last three years to data centers. About a dozen biotechnology firms including the startup NanDio Inc. have moved into a new research facility across the street from the University of Notre Dame.
Even in Midwestern cities where populations are increasing, it’s going to be hard to reverse the longer-term trend of declines, said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
“The No. 1 limiting factor in the rebound in the Midwest is demographics,” Vitner said. “After years of outflows, the population tends to be older, and we haven’t seen a reverse migration of the magnitude we need to offset that since after the Civil War.”
While Western states such as California and Nevada have experienced sharp home-price gains after suffering the biggest plunges during the crash, the Midwest didn’t fall as hard. Prices in the Midwest -- Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin -- fell 29 percent during the housing crash, compared with a 30 percent decline for the U.S. as a whole. The West slumped 49 percent.
Cleveland, derided as “The Mistake by the Lake” after a polluted river caught fire in the 1960s, is outperforming trendier markets on the East Coast. Its median home price has climbed 25 percent in three years to $105,900, while prices in Ohio’s capital, Columbus, gained 28 percent to $149,900.
“Ohio has cleaned up a lot of its rivers, including the one that runs through Cleveland,” Vitner said. “Now, it’s an asset, and the new homes built along it sell at a higher price point that has helped to boost the city’s median.”
In terms of comebacks, nothing beats Reno, Nevada’s 82 percent home-price gain in the past three years. Atlanta had the second-biggest increase, at 80 percent, followed by the Cape Coral and Fort Myers, Florida, area, at 77 percent. Even with the increase in values, Reno’s median home price is still 36 percent below the peak of the last housing boom, Atlanta is off 10 percent and Cape Coral-Fort Myers is down 29 percent.
The median home price in the Midwest was $156,500 in the second quarter, making it the cheapest U.S. region.
“We didn’t have the whipsaw movements we saw in Florida or Nevada,” said Buttigieg, South Bend’s mayor. “Because we didn’t see that boom-style kind of growth, our homes have stayed much more affordable.”
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