Affordable Homeownership in the Grand Rapids-Wyoming, Michigan HMA Despite Rising Home Sales Prices
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses. Analysis in this article covers the period from June 2020 to June 2021.
The Grand Rapids-Wyoming, Michigan housing market area (Grand Rapids HMA) is in west central Michigan near the Lake Michigan coast. The Grand Rapids HMA includes the counties of Barry, Kent, Montcalm, and Ottawa; the central city of Grand Rapids is the seat of Kent County. The area has a relatively robust manufacturing sector with notable production of office furniture and craft beer. The Grand Rapids HMA’s population is estimated at 1.08 million. A recent Comprehensive Housing Market Analysis highlighted the economic and housing market activity of the Grand Rapids HMA.
Economic activity expected to resume to pre-pandemic levels
Nonfarm payrolls in the Grand Rapids HMA declined from June 2020 to June 2021 because of shutdown measures implemented by policymakers to reduce the spread of COVID-19. Payroll declines occurred in every employment sector except for the mining, logging, and construction sector and the transportation and utilities sector, which saw employment rate increases of 2.4 percent and 7.6 percent, respectively. Area sectors experiencing the greatest declines in employment rates during the period include the leisure and hospitality sector and the information sector, which fell 13 percent and 12.7 percent, respectively.
By June 2021, the HMA had recovered roughly 80 percent of the jobs lost due to the pandemic shutdown restrictions and had an unemployment rate of 5.2 percent, higher than the prepandemic unemployment rate of 2.9 percent but lower than the national average of 5.9 percent.
The manufacturing sector is the Grand Rapids HMA’s largest employment sector, accounting for 20 percent of area payrolls and 5 of its 10 largest employers. From June 2020 to June 2021, employment in the manufacturing sector declined by 4.2 percent for a loss of 4,700 jobs.
The education and health services sector is the area’s second-largest employment sector, accounting for 17 percent of area payrolls. The sector includes Spectrum Health, which, with a workforce of 25,000, is the area’s largest employer, and Mercy Health, which has 8,500 workers and is the area’s third-largest employer. From June 2020 to June 2021, employment in this sector declined by 1 percent for a loss of 900 jobs.
The professional and business services sector is the area’s third-largest employment sector, accounting for 13 percent of area payrolls. The sector includes Axios HR, which has 5,000 employees and is the area’s fifth-largest employer. From June 2020 to June 2021, employment in this sector declined by 3.7 percent for a loss of 2,700 jobs.
Over the next 3 years, the unemployment rate is expected to approach prepandemic levels, and nonfarm payrolls are estimated to increase by 2.1 percent annually.
Homeownership remains affordable despite an increase in average home sales prices
The homeownership rate in the Grand Rapids HMA is estimated at 73.3 percent, higher than the national average of 65.4 percent. The report partly attributes the high homeownership rate to “economic expansion following the Great Recession and low mortgage rates.”
Home sales market conditions in the area are tight, with an estimated vacancy rate of 0.5 percent. From June 2020 to June 2021, new and existing home sales increased by 20 percent for an additional 23,000 home sales in the HMA. During this period, home sales prices increased by 13 percent for an average price of $251,100. Despite this increase, the area remains relatively affordable, which is reflected in the HMA’s high homeownership rate.
From June 2020 to June 2021, home sales permitting increased by 10 percent over the previous year for an additional 2,000 housing units. New home construction is concentrated in the suburban areas of Grand Rapids. From 2017 to 2020, approximately 40 percent of new home permits were in the townships of Byron, Georgetown, and Cascade.
Apartment market conditions in the HMA are tight, with an estimated rental vacancy rate of 4 percent. From June 2020 to June 2021, approximately 1,125 rental units were permitted, an increase of 31 percent from the previous year. During this same period, the average monthly apartment rent was $932, an increase of 4 percent from the previous year. Approximately 65 percent of rental units are in multifamily buildings, and 31 percent are in single-family homes.
During the next 3 years, demand is estimated for 9,975 new homes and 4,525 new rental units. For more detailed information, see the recent Comprehensive Housing Market Analysis of the Grand Rapids HMA.