The Real Estate market in the Grand Rapids area is hopping! High buyer demand combined with a very low inventory is a recipe for high prices. While I don't have a crystal ball, having listened to many economists and keeping a close eye on the market, we don't see that changing anytime soon. I often hear from prospective buyers, "I am just waiting for the bottom to fall out, then I'll buy." While this is happening in some markets across the US, this is not the expectation for West Michigan, at least not anytime soon. There are several different reasons for this, but I will focus on three main reasons: 1) diverse industries represented, 2) Low cost of living, and 3) many universities in the area, drawing in students from all over the world.
During the 1950s and 1960s, Detroit was the hottest place to be in Michigan, bringing in people from all over to fill the jobs needed for the automotive industry. "By the mid-twentieth century, one in every six working Americans was employed directly or indirectly by the automotive industry, and Detroit was the epicenter" (Gilder Lehrman). "By 1950, Detroit had become the 5th largest city in the United States...[however], between 1948 and 1967--when the auto industry was at its economic peak--Detroit had lost more than 130,000 manufacturing jobs" (Gilder Lehrman). Detroit didn't have any other major industries to support the job loss, which led to many moving away.
West Michigan is in a very different position economically than Detroit in the mid-1900s. Many industries are represented in Grand Rapids itself, let alone West Michigan as a whole. Not only is it important to see that multiple industries exist, but also to look at the industries which are represented. Some of the industries strongly represented in the Grand Rapids area are healthcare, food service, distribution, manufacturing, and more recently, technology.
If there was a slowdown in one or two of these industries, other industries would be present to help provide other opportunities and support to the city. When you think of recession, many people often think of job loss, tight budgets, and reduced spending. While this is true, spending also gets reallocated to ensure the basic necessities are being taken care of. As we look at industries that often do the best in recession times, three successful industries during these times are healthcare, grocery stores, and education. Grand Rapids holds a big presence in all of these areas. Companies such as Corewell Health (formerly Spectrum Health), Mercy Health, Meijer (a grocery store chain), and Spartan Foods offer many job opportunities, even during recessions.
People still get injured and sick during a recession. Not only does this support high-paying jobs for doctors and nurses, but also offers opportunities for behind-the-scenes roles in administration. As people look to tighten their budgets, a common way to save money is by reducing the amount people go out to eat. This can take a big hit to the restaurant industry, but since people have to eat, grocery stores often do well as a result. Meijer and Spartan Foods both provide, not only retail grocery jobs in their stores but also corporate jobs since they are both headquartered in the Grand Rapids area.
Education provides an interesting element. While people are tightening their belts and reducing costs, colleges and universities often see an increase in higher education. According to Heidi Rivera, with Bankrate, "College enrollment tends to increase during economic downturns as many go back to school in hopes of improving their job prospects" (Rivera). People see a college education as a way into new higher-paying opportunities. Between community colleges, private schools, and state universities, Grand Rapids has at least 15 higher-level education facilities represented. Many of these offer popular degrees which can lead to recession-proof jobs, such as pre-med, nursing, and teaching. While the industries in Grand Rapids are a great benefit to those looking for a city with a stable economy, the cost of living also plays a role.
According to payscale.com, while Grand Rapids transportation and utility costs are slightly above national averages, 1 and 3% respectively, grocery and housing costs are substantially below the national average, at 8 and 15% respectively (Cost of Living). As of the end of December 2022, the average price of a home nationally was around $467,000 (Median Sales Price), while Grand Rapids was around $305,000.
In 2020, when covid-19 shut down many businesses temporarily, it forced employers to offer remote work options to those whose jobs have the capability of doing so. As a result, many people moved to West Michigan from areas where the cost of living was much higher. While the cost of living has increased, it is still below the national average and allowing Grand Rapids to remain a highly desirable place to live.
The culmination of increased remote and work-from-home jobs, lower cost of living, and an increase in job opportunities in Grand Rapids filled by many coming out of local colleges and universities, and near-record low housing inventory levels has resulted in a substantial housing shortage (both buying and renting). Many people are looking to buy homes, while fewer are looking to sell. According to a study done by Bowen National Research, an Ohio-based real estate market analyst, Kent County is projected to need an additional 34,699 housing units by 2027 (Watson).
Numerous industries across the Grand Rapids metro continue to thrive and grow, increasing the need for housing across the area. For those waiting for the bottom to drop out or asking if you should hold off buying, there is no sign of a balloon popping or the bottom dropping out in the near future. Prices are steadily increasing. Demand remains high, even as interest rates increase. Should interest rates decrease, this will attract more buyers to join or return to the market. Inventory levels remain very low in the Grand Rapids metro, making it a challenging market for buyers. The cost of living remains below the national average, making it still an affordable place to live. For buyers able to find a house in the current market, now is a good time to buy. There is room for the price of homes to increase as the demand to buy and the growing Grand Rapids area remains a factor. If you do choose to begin searching for a home, make sure to prepare yourself, to put yourself in the best position as you run up against the rigorous competition.
Here are a few steps you can take to prepare.
1) Talk to a lender - talk to a trusted local lender who can advise you on where you are financially and can fully educate you on what options are available for your current situation.
2) Improve your credit score: Make sure you are paying all of your bills on time. Paying late can lower your credit score, causing your interest rate to increase, thereby lowering the amount of house you can afford.
3) Save up for a down payment: Having a strong down payment can allow you to have a stronger offer
4) Talk to a trusted real estate agent: Having a trusted real estate agent on your side can help you navigate the current West Michigan Market.
If you have any questions about where our current market is or your specific situation, click the contact button at the top of the page.
Works Cited:
Cost of living in Grand Rapids, MI. (n.d.). PayScale. Retrieved March 23, 2023, from https://www.payscale.com/cost-of-living-calculator/Michigan-Grand-Rapids
“The Gilder Lehrman Institute of American History Advanced Placement United States History Study Guide.” Motor City: The Story of Detroit | AP US History Study Guide from The Gilder Lehrman Institute of American History, 31 July 2012, http://ap.gilderlehrman.org/history-by-era/politics-reform/essays/motor-city-story-detroit.
Median sales price of houses sold for the United States. (2023, January 26). St. Louis Fed. https://fred.stlouisfed.org/series/MSPUS
Rivera, Heidi. “Paying for College in a Recession: 2023 Statistics and Predictions.” Bankrate, 28 Oct. 2022, https://www.bankrate.com/loans/student-loans/recession-prediction-and-statistics/.
Watson, Rachel. “Grand Rapids Area Housing Gap Grew 59 Percent during Pandemic - and It's Projected to Worsen.” Crain's Detroit Business, 27 Feb. 2023, https://www.crainsdetroit.com/west-michigan/grand-rapids-area-housing-shortage-projected-worsen.
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