High housing costs in places like California, Seattle, Dallas, New Jersey, Chicago and New York are leading to a housing boom in the so-called Rust Belt states.
This boom is not in new home construction but in the appeal of older houses and neighborhoods in smaller towns and cities in Rust Belt states that have lost value over many decades as prosperity dissipated and populations fled.
These states are rebounding economically and have been doing so for some time. Ohio is on a major upswing and Michigan has been rebounding under eight years of no-nonsense Republican governor Rick Snyder.
After decades as “the sick man of America”, Michigan is now ‘cool’ and is attracting young people again. One recent survey ranked it the 7th best state to do business.
Even Detroit is growing again. So why are these states coming back?
First and foremost, it is a product of good economic policies by Republican governors even in the dismal Obama economy. Second, the national economic boom under president Trump is buttressing improving state economies. Third, younger and middle-aged Americans are moving to or returning to states with lower living costs that were left behind in the 50-year dash to The Sun Belt (the US South and Southwest). CNBC.com reports:
As real estate prices in major U.S. cities continue to soar, some young buyers and renters have decided to take their business elsewhere. They’re investing in homes in such states as Ohio, Michigan and Wisconsin, experts say, in search of more affordable living and new places to plant down roots.
For decades, the part of the U.S. otherwise known as the Rust Belt has been synonymous with hard times … ever since manufacturing bases like Detroit began to suffer the effects of de-industrialization. Plants closed down, jobs disappeared, and once-vibrant cities became symbols of decay.
In recent years, however, the revitalized Rust Belt economy has brought in younger workers, and made the area’s real estate an attractive investment bet.
…And slowly but surely, formerly blighted towns and cities are coming back to life, with the help of a younger class of real estate buyers. According to Paul Boomsma, president and CEO of Leading Real Estate Companies of the World (LeadingRE), the latest influx of buyers see cities as financial opportunities and places to build something new – especially with prices far below prevailing prices in big cities.
“Millennials are swiping up properties for next-to-nothing prices near downtown city areas that have completely revitalized,” Boomsma said. LendingRE has listed a three-bedroom Victorian home in Mansfield, Ohio with an asking price of $39,900.
So you can buy a big house with history, charm and classy architecture (stained glass, ornate woodwork, antique design, etc.) and a large yard as opposed to a tiny apartment in New York City or a small cookie-cutter home or condo near San Francisco. It’s no contest for many people.
The house may need some fixing up, but you can take the hundreds of thousands of dollars that you save and invest it in your business, family or retirement. Taxes are much lower too as are the costs for plumber, electrician, insurance, etc.
Those who come from high-cost areas are thrilled with the low cost of living in these rebounding areas and many – including retirees – are making out like kings selling pricey homes in high-cost regions and banking the difference.
Today many workers live where they want and commute longer and longer distances to work, or they work on the internet, or they have more flexible work arrangements. At the same time the lower cost of living in the Rust Belt is inducing businesses to relocate there as well, offering new opportunities for all.
But didn’t millions of people flee the cold Winters of the North?
Yes, but the Winter was just one of many factors working against the Rust Belt; the economy was the main issue. Today those same people must suffer through blazing hot and muggy Summers in Arizona, Texas and Florida along with high costs, traffic, high taxes and insurance on expensive properties, etc. Thus they accept the Winters as part of the package of moving back North to a quieter, more alluring lifestyle. CNBC.com continues:
However, experts say there’s more to consider than bargain prices. “There is a community-mindedness with millennials that attracts them to the smaller Rust Belt towns,” said Peter Haring, president of Haring Realty in Mansfield, Ohio.
“We are seeing an intense interest in participating in the revitalization of our towns and being a part of the community. It’s palpable, and it’s exciting,” he added.
Yes, but it comes primarily from good economic policies implemented by Republican governors like John Kasich in Ohio and Scott Walker in Wisconsin. When they were both elected in 2010 those states were in really bad shape. They rebounded with get-tough policies, and the national Trump economic boom has made things better and better.
It also is important to note that young Americans today are builders and movers as Americans always have been. They are mobile and like to invest in growth and revitalization. They get great satisfaction out of it and find it exciting. CNBC.com continues:
He cited an average price of $127,000 for a home in Mansfield, but that low price comes with some drawbacks, such as distance. The closest urban hubs, Cleveland and Columbus, are each an hour’s drive away, and amenities are still lacking in many cases.
“For people working in those cities, they are sacrificing drive time,” Haring said. “In some cases, they are sacrificing the convenience of nearby shopping and restaurants.”
So what? There are always trade-offs no matter where you live. You get a bigger house in Mansfield, perhaps with a colorful history and a nice yard. And small-town charm on a tree-lined street.
Meanwhile businesses also are re-locating to these smaller towns and Rust Belt areas to take advantage of lower overall costs, including business rent and living costs for employees.
At the same time cities like Cleveland and Detroit are coming back slowly but surely. And they will continue to rebound as economic momentum takes root, as it is doing in Detroit and nationally. Nikitas3.com wrote about Detroit in December 2017:
This is from Yahoo News:
An 800-foot-tall centerpiece is coming to Detroit’s resurgent downtown as the city continues to build momentum about three years after exiting the largest municipal bankruptcy in U.S. history.
… But the bad times for downtown appear to be largely over. Bedrock Detroit’s $900 million, two-building project will include a 58-story residential tower and 12-floor building for retail and conference space. Up to 450 residential units can be built in the tower.
It is one of four projects representing a $2.1 billion investment in downtown by the Detroit-based commercial real estate firm. Altogether, the projects are expected to create up to 24,000 jobs in a city that desperately needs them and generate $673 million in new tax revenue.
… A ribbon-cutting was held in August for an $860 million sports complex just north of downtown. The 20,000-seat Little Caesars Arena is the new home of the Detroit Red Wings and Pistons. It will anchor a 50-block neighborhood of offices, apartments, restaurants and shops.
… Software maker Microsoft announced in February that it plans to move its Michigan Microsoft Technology Center next year from the suburbs to downtown. In 2016, Ally Financial opened new offices downtown that the financial services company said eventually would be occupied by more than 1,500 employees and contractors. (end of Yahoo News excerpt)
Look at all of this great news. This is happening after Michigan elected a tough-guy, conservative Republican governor in November 2010 named Rick Snyder, and re-elected him in 2014. Snyder is a former computer executive and venture capitalist. His net worth is estimated at $200 million.
Snyder began by rooting out Democrat corruption, reforming the Michigan state budget and reducing taxes, welcoming business back to Michigan, and forcing Detroit into bankruptcy which Democrats vehemently opposed just as Obama opposed official bankruptcy for General Motors and Chrysler before bailing them out with federal dollars.
This Detroit bankruptcy compelled the city to confront its problems and to reorganize itself. Now, with a pro-growth agenda under Snyder, Detroit and the entire state of Michigan are bouncing back from the devastation wreaked by the labor unions that drove much of the auto industry out with decades of confrontation, belligerence and outrageous wage demands.
This is what president Trump is doing on the national level. It always works.
Thus while socialism (corruption, greedy and aggressive labor unions, excessive taxes, regulations and radical ‘green’ laws) destroyed the Rust Belt economies, free-market capitalism is helping to naturally revive them.
Many of the economic migrants to the Rust Belt are people in their 30s, 40s or 50s who may have grown up in a Rust Belt area like Michigan that was lacking opportunity decades ago when the trend was to flee to the South and West, or to New York or Seattle.
Many have longed to return once they became established in their careers and as Rust Belt economies rebound. This is happening even in non-Rust-Belt Vermont which has seen an outflow of younger people over the last few decades but a return in the last 10 years of middle-aged Vermont-born natives looking for the quality of life that they knew as kids.
Vermont is also attracting a well-to-do retiree population that does not have to put up with its tough Winters on a day-to-day basis as working people must, i.e., they can stay home during a snowstorm or they spend Winters in Florida. CNBC.com reports:
Separately, a number of large companies are moving into these areas, creating new employment opportunities while revitalizing the area. One example is home appliance manufacturer Whirlpool, whose corporate headquarters are in Benton Harbor, Michigan.
“It helped revitalize surrounding areas with new lifestyle and cultural amenities,” said LendingRe’s Boomsma. “This type of corporate commitment draws a young workforce, who are attracted by the lifestyle, paired with the relative affordability.”
Again, Michigan is doing great. Its 250-year history as a farming, trading, logging, mining and manufacturing center laid the groundwork for its revival. Michigan always has had a productive, educated, skilled and innovative workforce that is blossoming again today. Michigan also is bordered by two of the Great Lakes which makes it desirable for leisure-time activities. CNBC.com continues:
For those who don’t want to commit to buying a home, the Rust Belt also has a robust rental market, according to Todd Stofflet, Managing Partner at the KIG CRE brokerage firm.
Millennials are creating demand for new apartments, which is a “a catalyst for retail, grocery and office development,” he said. “As downtown populations experience a resurgence, so does the dining, entertainment and lifestyle of the area.”
Thus things are looking up for the Rust Belt in many ways. This shows how a free-market capitalist economy can right itself after socialism destroys it.