Wage growth falls flat in housing market
You may have seen the recent news about our region ranking among the fastest wage growth areas in the country. The Grand Rapids-Wyoming metropolitan statistical area – Ottawa, Kent, Barry and Montcalm counties – has seen a 5.2% wage growth, which is the 17th-fastest rate among 53 of the nation’s largest metro areas.
This is great news. But before we schedule a Zoom party to celebrate, we need to talk about the other side of the story. While wages have ticked up 5.2% over five years, the average sale price for a single-family home has skyrocketed – we’re talking 64.5% during the same time. That’s according to our friends at the Greater Regional Alliance of Realtors®. Note: Only 11% of that price growth can be attributed to normal inflation.
The MSA’s average home sales price has gone from $152,274 to $248,170. Here’s the county-by-county breakdown:
· Ottawa – From $190,949 to $304,905 = 59.7% increase
· Kent – $167,364 to $268,885 = 60.6%
· Barry – $150,705 to $239,982 = 59.2%
· Montcalm – $100,079 to $178,911 = 78.8%
The MSA’s 59.3% disconnect between wages and housing prices is why, in part, our communities are experiencing a housing affordability crunch or, as some like to call it, a “seller’s market.” The crunch also is the result of West Michigan’s housing supply shortage – we haven’t built enough housing to keep up with demand at all price points – and the skyrocketing cost of lumber. Lumber prices have risen more than 180% since last spring, driving up new home prices, according to the National Association of Home Builders.
We’re seeing the impact of these realities in neighborhoods across West Michigan, with nearly 100% of single-family homes selling above their list price. And for-sale houses are going fast – they’re on the market an average of one month vs. more than two months a few years ago. This has created an uber- competitive real estate landscape and has prompted some agents to post “bidding war” placards on for-sale signs.
Rising home prices and relatively flat wages are squeezing out potential homebuyers, leaving households in a less secure financial position, widening the racial wealth gap and forcing young professionals to fall further behind. And this problem isn’t unique to our communities – it’s happening across the country.
In West Michigan, we need to broaden our thinking beyond our limited housing choices – single-family homes and suburban apartment complexes, with very few options in between.
Single-family homes on large lots are a one-size-fits-all solution to diverse housing needs and preferences. The result of this narrow solution can be seen in Ottawa County, where roughly two-thirds of all households are just one or two adults with no children at home, yet the number of properties reserved for large single-family homes outnumbers properties zoned for more diverse housing choices 15-to-1.
But there are bright spots.
The City of Grand Haven has adopted a comprehensive zoning update that allows for a much greater variety of building types, sizes and price points, including walkable downtown condos, nearby townhouses and small cottages or accessory dwelling units in the first-ring suburban neighborhoods.
The City of Holland’s proposed Unified Development Ordinance is another example of how communities can support more diverse housing at all price points. If approved, the UDO would give homeowners more flexibility, allow for more housing choices without changing the character of neighborhoods and positively impact the community for generations to come.
The City of Wyoming’s recently approved master plan provides a roadmap for communities to foster new housing development, diversify housing options and increase housing affordability and accessibility.
And the City of Grand Rapids’ recent zoning amendments allow ground-floor residential uses within neighborhood commercial districts. This change gives building owners who may have lost retail tenants during the pandemic the ability to reposition ground floor space to become better utilized as condos, apartments or live-work spaces.
We know closing the gap between wages and housing prices is a heavy lift – and one that takes several sectors in our region working together: local governments, developers and nonprofits. That’s why Housing Next is working closely with all three as we partner with communities to review their master plans, evaluate local zoning standards and find opportunities to allow for more housing that aligns with the community’s vision for its future.
Working together, we can ensure our communities offer enough diverse housing at all price points for existing residents and for those wanting to call West Michigan home.