The Big Flush: $180 billion vanishes from Michigan

Michigan home- and business owners have lost an astounding $180 billion from the value of their properties over the past four years — the result of auto company bankruptcies, a severe national recession and the worst state economy in more than 70 years — according to an analysis of state data by Bridge Magazine.

Adjusted for inflation, property values have plunged 27 percent since 2007. In other words, Michigan homeowners and businesses have lost about $1 in every $4 of property value they once possessed.

The $180 billion loss in value is an amount five times larger than General Motors’ market capitalization. It represents an average loss of $18,200 for every Michigan resident.

Experts say the real estate collapse could slow Michigan’s economic recovery for years as residential, commercial and industrial properties reset at much lower values.

“That may be the biggest story as far as Michigan’s economy is concerned,” said Michigan State University economist Charles Ballard.

Booming home prices and the easy availability of home equity loans in Michigan once allowed big-spending homeowners to use their property as virtual ATM machines. They pulled out hundreds of millions of dollars in equity to buy cars, big screen televisions and other purchases that kept the economy humming.

Each year, the state of Michigan collects property value information from all local governments in the state. Using this data, Bridge compared values in 2007 to values in 2011, both in raw figures and adjusting for inflation. The result was “Big Flush,” a loss of more than $180 billion in Michigan assets in a four-year span.

Not anymore. The crash in the value of Michigan’s homes and other property shut off the lights at this party.

The total value of Michigan’s property has plunged 20 percent since topping out at $906 billion in 2007. Today, Michigan’s real estate is worth $726 billion, according to Bridge’s review of Treasury Department data.

That has resulted in a variety of negative impacts for the state’s economy, schools and local governments.

Homeowners no longer have equity available to finance big-ticket purchases or to remodel their homes.

Unemployed homeowners or those with better job opportunities can’t go after jobs in other locations because they can’t sell their houses for as much as they need to pay off mortgages. And the high rate of foreclosures is pushing values down further.

Kelly Sweeney, chief executive of Coldwell Banker Weir Manuel, said the number of sales and prices of owner-occupied homes in Oakland County has started to rise as Michigan has added about 70,000 jobs this year.