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Michigan City is a study in contrasts. We've lived here about a year and a half. We rented on Washington St. near 11th. The building was outwardly charming. But it turned out to be poorly insulated, moldy, other tenants mostly thoughtless. And don't underestimate how loud the trains (especially the freight trains) sound in the night. The area itself can appear to be frightening, but we found the people mostly friendly if you made the effort to talk to them. We even enjoyed once forking $10 over to a drunkard down by the liquor store, because he was sadly charming. We feel there's above average black-toward-white racism here, and there seems to be a tendency for the natives of all races to assume you're a "FIP" (f****** Illinois Person) if you're not walking around toothless. I may be exaggerating a bit there, but that's how it's seemed.
That all said, the positives here outweighed all that, and we ended up buying a house here, and pretty much adore where we're at, about 1/2 mile from the lake, not far from the casino. Walking distance to the lake is supremely wonderful. We like gambling on occasion, so the casino is a plus (sure wish it were non-smoking, though). The downtown is rather depressing, as is what we've heard about the selfish, visionless idiots who allegedly own most of it, and have the most influence in local politics. But the library is quite nice. And everything east of here is spectacular: New Buffalo, and on into Michigan.
At the same time (I started another thread on this, but I guess a moderator thought it wasn't thread-worthy... oh well), we've come to believe there's a crystal meth lab in our neighborhood, at that's ruined the mood a bit. But we're hoping to prevail in that, since it's a very isolated case, and completely out of keeping with the rest of the residents and mood of the environment.
To perhaps address your question better, there are nooks and crannies of goodness/badness all over the place here, so there's no exact answer. Generally speaking, 11th St. is noisy, the area around Elston Middle School seems dangerous, the area around the projects between Michigan Avenue and Pine Street look like they might be trouble, but people seemed friendly. Same from the Lighthouse Mall south to 11th. North of Hwy 12 is beautiful and serene, but with plenty of seemingly stuck up summer visitors.
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