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Michigan will have a deficit of more than 150,000 housing units by 2045, according to a state housing affordability study released Monday. And Metro Detroit is one of the most badly affected regions.

That forecast from the Michigan State Housing Development Authority provides a bleak picture for future homebuyers if nothing is done. A tight housing market in recent years already has driven up single-family prices by more than 70% since 2012 statewide and has led to bidding wars, especially in sought-after neighborhoods.

"There's not a lot of inventory," said Russ Ravary, a real estate agent for Real Estate One who works with homebuyers and sellers across Metro Detroit. "We're having to work harder to help somebody find a house and win the bid. You have to pull every trick out of your hat. I explain, 'You've got to give a good price the first time.'"

The report is the first of its kind done by the state since 2006. It was one of the recommendations from the Home Builders Association of Michigan in June 2017 when it issued a "wake-up call," describing the lack of affordable housing in the state at near-crisis levels.

"It's going to validate what we've been saying for quite some time, which is that we are approaching a pretty significant housing crisis," said Bob Filka, president of the Home Builders Association of Michigan. "Michigan is known for its housing affordability. That’s going to change if something doesn’t happen, and local communities are going to have to start working to find the housing investment they need."

By 2045, Michigan is expected to add more than 462,000 new households, including 327,000 owner households, according to the Understanding & Advancing Homeownership in Michigan companion report from the housing authority and Virginia-based consultancy firm RKG Associates Inc. But of existing vacant units, only about 311,000 could be one day brought onto the market, the study estimates — a deficit of nearly 152,000 housing units, including more than 107,000 owned.

"We’re predicting an increase in the number of households as being the prime driver of the need for housing, especially among one and two-person or smaller households," said Laurie Cummings, market specialist and research analyst for the authority.

With nearly 81,000 off-market vacant units, the city of Detroit does have sufficient housing stock with a net surplus of almost 25,000 owned units expected in 2045, according to the study, though many of the homes are in need of major rehabilitation work, the financing of which is a challenge for many. The researchers predicted Macomb, Oakland and Wayne counties, however, would have a deficit of nearly 51,000 owned units. Only the 13-county west Michigan region was greater with nearly 57,000 too few units.

But many homebuyers already are feeling the squeeze. Erik Dahlstrom and his wife have been looking to upgrade from their 1,100-square-foot starter home in Ferndale for two years. They've placed nearly 10 offers on homes — only one was accepted at $15,000 above their $350,000 ceiling price but they passed on it after an inspection found foundation issues, mold and other problems.

"It's a very frustrating process. The market is so tight," said 41-year-old Dahlstrom, who works in sales. "Even the ones that are bad are listed high."

The family is looking for a slightly larger open-concept home on at least 1½ acres in a good public school district such as Brighton, Hartland Township or Northville. They aren't afraid of a fixer-upper if they can still do it within budget. But with their daughter starting kindergarten in the fall, Dahlstrom said they are feeling the pressure.

"I bought my home for $125,000 six years ago in 2013," he said. "I could turn around and sell it for about $230,000 within a week. But I'm not putting it on the market because I can't find a house, so people looking to have a starter home can't buy my house."

Sales prices for single-family homes in Metro Detroit rose 90% between 2012 and 2017 to a median single-family price of more than $188,000. The median new construction price was more than $391,000.

The result is what is known as the missing middle market, a national trend in which households earning between 80% and 120% of their area median income can purchase existing but not new homes. As a result, the state has seen a 3% decline in owner-occupied units and an 11% increase in rental housing units.

Labor, material and pre-development costs have risen so much that homebuilders have tended toward opposite sides of the spectrum, Filka said, to apartments and condominiums, which saw a 22% increase in the state since 2012, and big, pricey homes. The average square footage of a newly constructed home in Metro Detroit was nearly 2,600 square feet in 2017.

With single-family homebuilding decreasing 16% since 2012 in Michigan and 26% in Metro Detroit, the problem only is expected to worsen. Between 2011 and 2016, a net 12,705 housing units were added in Michigan, a near zero percent change. The median house age now is 1970 in the state and 1960 for an owner-occupied house in Metro Detroit. It is 1946 in Detroit.

But many buyers fear they won't recoup their investment in an older home, especially with prices already so high, Cummings said.

"I suspect it will continue," she said. "We have seen a little bit improvement" with Michigan recovering about half of the almost 90,000 construction jobs it lost between 2001 and 2010. "There's so much pent-up demand. Household growth is expected going forward. This will be a problem that will be around for a while."

The report outlines 16 strategies municipalities, community programs and corporate partners could implement to help prevent the trend. They include some programs already in existence with the state housing authority and other programs such as down payment assistance and low-interest rate mortgages. But it also encourages home rehab loans, infrastructure grants to alleviate costs to ready property for development, zoning reforms to allow multi-unit construction in single-family neighborhoods, clarifying building department assessments, reviews and fees that account for 25% of the cost to build a typical home, and offering incentives to employers in areas where housing is available such as in the Great Lakes Bay Region around Saginaw.

Real estate agents, homebuilders and others in the industry who served on the advisory board for the study have pledged to work together to bring the concerns and solutions to communities across the state of Michigan.

Having regional data in the state of Michigan will help community leaders to determine the best solutions for their community, said David Allen, the state housing authority's chief market analyst.

"The complexity is kind of daunting," he said, "but we have more options on what to do and how to move forward."

bnoble@detroitnews.com

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