I agree that self selection (academically and financially) is the main reason for the relatively small in state applicant pool size. More in state applicants would only lower the admission rate. I doubt they will admit more from in state as the gap between in state and OOS is quite significant already.
Note that most of the in state students at UM are from the 4 SE counties but not really because of proximity. These 4 counties also have larger population, better schools, and families with higher household income, etc.