Cost of Building a House in Northern Michigan

As someone who built their own home here three years ago, I understand the dilemma.  It’s a beautiful area and many people want to live here, at least when the weather is nice! As far as the construction costs go, I’ve generally heard from builders a starting point of $400/sf for a custom home, which seems like about double the cost of building in urban centers like Chicago and Detroit.  Unfortunately, with potential tariffs looming and uncertainty in the market, the cost of construction is unlikely to go down anytime soon. 

In talking to local builders, I’m aware that some clients have decided to sit tight for the moment rather than wade into the uncertain waters of market forces.  However, waiting until next year is no guarantee of saving money.  Beyond the price increases for a range of materials, there’s also the challenge that bids from many suppliers are now guaranteed to be good for only weeks. One builder told me that he expects construction costs to be up a minimum of 5-10% next year. Despite all this uncertainty it doesn’t appear that construction is slowing much. In fact, I can hear hammers going and heavy equipment moving around on three projects within a half mile of my house.

The fact is that the greater Traverse City area is a very desirable destination, and once people have spent a little time up here the thought of having a place of their own is not far off.  But there is a fairly high bar to jump for entry in terms of property costs.  In my own little stretch of Leelanau County I saw the price of a piece of property comparable in size and location to my own jump over 2 ½ times in just over five years.  Even with all the lakes up here, water-front property is a highly sought-after commodity and a rising tide lifts all boats, so even inland properties are increasing in cost.  And the lack of affordable housing has been a local challenge for years.  The pressure of property investors building vacation rentals and people wanting seasonal homes drives the construction costs higher for everyone.

Part of the equation is scarcity of construction workers.  Reported in the latest issue of Traverse City Business News, “Michigan lost 800,000 jobs between 2000 and 2009, and was still 250,000 jobs shy of its pre-recession levels a decade after the 2008-2009 financial crisis.  Those numbers bear out in the state’s home production statistics, which have never recovered from the Great Recession.”  This is consistent with conversations I’ve had with contractors who often struggle to hire people.  I’ve also had discussions with local suppliers who have great difficulty finding employees that can afford to move up here, principally because of housing costs. With over 10’ of snow accumulation this past winter, it’s not surprising that construction slows down, and not everyone wants to work in these conditions.

So now that you know why it’s so expensive to build up here, what’s the solution?

• Temper expectations. Perhaps owning water-front property isn’t the highest priority, especially given the accessibility of lakes via boat ramps and marinas.  There are many opportunities for lots with a lake view and a rented slip at the marina on your favorite lake can complete the picture of summer fun up here.  Many people relish the quiet of a house in the woods, and it’s amazing how quickly you can get away from the congestion of Traverse City into the surrounding idyllic farmlands and quaint tourist towns.  Having lived here for a few years now I have really come to appreciate the amenities of Traverse City, including excellent restaurants and shops.  But, having lived in the Chicago suburbs for 30 years I’m also extremely happy to be rid of the crowds and traffic.

• Be prepared. If you’re determined to build, despite all the challenges, know what you’re likely to encounter.  As I mentioned, $400/sf is a reasonable starting point for construction costs, and that means pretty basic construction, possibly using vinyl siding, low-end windows and luxury vinyl tile on the floor.  If you’re picturing nicer siding, better windows and hardwood or tile floors, then you need to budget more.  High-end construction can easily run over $800 to $1,000/sf.

• Be patient. Most quality builders have a year or more backlog for taking on new clients.  Especially with the scarcity of construction workers, there is no incentive for overloading their schedule. Most General Contractors are working with a limited pool of subcontractors so there’s quite a bit of juggling required to fit everyone into their schedule. Given the right fit of contractor and client you should expect a smooth and harmonious building process, as long as you temper your expectations on time and budget. It’s best to plan at least a year in advance before expecting to break ground, not including the time to develop plans with an architect.

• Plan for the weather. The weather definitely can play a role in when you start,- and finish,- construction. The winter can be a challenging time to build, though most contractors take the weather in stride. Depending on the given year it’s possible to pour concrete even through the winter, though it will probably add cost.  I was shocked to see my roofers start on my house in January, though they didn’t seem to have any problems due to the cold weather and did a great job. Spring is a common time to break ground, but if you start too early, you have to contend with frost laws that limit the weight of construction vehicles on the roads.  It’s not unusual to get some nasty weather, even snow, into April.

• Plan for necessities. It’s not uncommon, once people get going on the planning stages of a new house, to start tacking on things that may not be entirely necessary. If you’re adding bedrooms in case your second cousin and his family come to visit one summer you may need to reconsider.  One of the most difficult things to do is to maintain the self-discipline to only build what you will need.  I know this from personal experience! I had the opportunity to redesign my house completely at least three times, and each time it got smaller, rather than larger. Unless you have an unlimited construction budget, you need to be thinking about that cost/sf number and decide how important it is to have room for every friend or family member who might visit at some time.  There are lots of good B&B’s in the area for overflow housing.

• Think outside the box. One of the most lovely things about living in northern Michigan is the environment.  From May through November, you are likely to be outside a good chunk of time, especially if you’re on vacation. Even for those of us who are working up here (me!) it’s hard to resist slipping outside for a few minutes whenever the weather is decent. If possible, incorporate some nice outdoor spaces into your house plans.  I have a covered back porch that I love to hang out on with my cat nearly every night in the summer.  That time of year it doesn’t get dark until 9:30 or 10 pm, so the opportunity to relish the local environment is undeniable.  I also love to open windows in my office so I can hear the birds and feel a little summer breeze.  Think about how your spaces relate to the surroundings and take advantage of the natural beauty around you.

• Check local zoning code. There may be zoning challenges to consider, and other local restrictions that can affect your plans. One factor I ran into that surprised me is that many localities restrict a piece of property to one house, regardless of how large it is. There is a growing trend toward ADU’s (accessible dwelling units) or guest houses, but they’re not always permitted in the area. If you’re building near the water, you will likely have extra hoops to jump through. EGLE (Environment, Great Lakes, and Energy) is the Michigan State authority that governs construction near lakes and wetlands. They can determine that you have to build further away from the water or critical dunes, and sometimes require mitigation for the impacts of construction on the environment.

• Check the soil. Before putting a chunk of money down on a lot, it may be useful to get a soil expert to check it out. It’s not unusual to run into unexpected issues, such as soil that won’t perc, underground springs, or soil with poor bearing capacity. Sometimes, a normal looking lot has areas that qualify as wetland, even without standing water.  If you suspect this might be the case, a wetland consultant can help sort out what the State of Michigan will require. Each lot is unique and has its own set of challenges or benefits to building your dream home.

 
If you need help navigating these challenges in building a house or an addition, feel free to call me. I’ve helped numerous clients look at a piece of property or an existing house before purchasing it and helped them determine what to do with it.  I can help figure you out where the best place to build or renovate is, how to orient a house and describe what the construction process is like.  Being prepared for unexpected hurdles can save a ton of money and help smooth the path to building your dream home!