West Side home prices: Blowing up or recovering?

Everyone agrees, 2015 was a crazy year for real estate in West Michigan. Why, to what extent, and how that affects our market are questions that are less processed and understood. Here, I’ll share some analysis and interpretation, to add perspective and to assist with drawing some conclusions. I’ll start broad and finish by examining the elusive “West Side” of Grand Rapids.

Prices have been steadily recovering for several years now that shadow inventory has been reduced to an uninhibitive level. Scroll back to 2006 when several years of uncertainty, angst and confusion trained sellers to stay in their homes while adding that extra bedroom, doing some remodeling, and postponing plans to sell. Selling was out of the question for many, while some found creative ways to simultaneously take advantage of the same situation by purchasing a fixer-upper foreclosure, or taking advantage of someone having to dump their residence at rock bottom prices. Not surprisingly, this was not the path for everyone and many just stayed put.

Team Grand Rapids made some nice moves over the off-season. The years of 2014 and 2015 brought increased public confidence in the economy and in real estate. Sellers this year were slow to respond after having hunkered down so long. First-time buyers and former renters, dealing with growing rental rates, were easily the quickest to respond. Understandably so. Real estate now is not as unpredictable or seemingly risky as it was in the thick of things, and interest rates are now historically low with banks again eager to lend. Meanwhile, the City of Grand Rapids is getting more and more fun and exciting, which is no longer a national secret. Why not dig in now, build a future, create some equity at 3.85% interest and save money on rent?

Here’s the point: Prices are steadily rising along with consumer confidence after a long period of the opposite. We have several very visual exemplifications that the local municipality, as well as commercial and residential investors, not to mention breweries (I hesitate to identify this as the most important but certainly up there) are highly confident in the city’s future, with the West Side as one of the frontiers.

Is anything left for the rest of us? Have all of the good homes been bought up? Is the coveted West Side now, as was asserted in "Just out of reach: Housing prices climb on Grand Rapids' Westside," unaffordable?

Let’s take a look at some sales data using the area of Grand Rapids’ West Side closest to downtown, including the Stockbridge Business Association, SWAN and John Ball Park Neighborhoods. This is the western gateway to downtown Grand Rapids which houses at least three new breweries, an increased GVSU presence, John Ball Park, Lincoln Park, the West Side Library and an unbelievably wide selection of affordable and delicious tacos.

For this comparison I examined annual sales figures from residential single family homes, over the course of each of three years: 2006, 2014, and 2015. Why these years? 2006 is the most identifiably recent pre-recession year, and 2014 and 2015 are the best to demonstrate post-recession real estate value recovery.

2006 Sales

Number of Sales: 83

Average Time on Market: 72 days

Average Sale Price: $92,468

Median Sale Price: $92,900

Low/High: $35,000 – $155,000

2014 Sales

Number of Sales: 83

Average Time on Market: 35 days

Average Sale Price: $80,876

Median Sale Price: $81,000

Low/High: $13,500 – $233,600

2015 Sales

Number of Sales: 82 (As of 12/14/15)

Average Time on Market: 36 days

Average Sale Price: $91,873

Median Sale Price: $84,950

Low/High: $19,000 – $325,000

The “median” sales figure is useful in correcting extreme high/low deviations in the average sale price, while the “average” sale is exactly how it sounds. “Days on market” demonstrates willingness and readiness in the buyers’ market, and also influx and/or lack of inventory and competition.

This geographic area is a great case study for many reasons, but the consistency in annual number of homes sold, with a deviation of only one home over each of three years is interesting. 2015 is bound to surpass these numbers in the final two weeks of the year, but the numbers are astoundingly close.

Conclusions

Buyers have not missed the bus; Grand Rapids is still wiping the sleep out of its eyes. Statistics show that while the difference between 2014 and 2015 sales is significant, with an 8.1% market-wide increase in average home price and 13% in the examined area, prices at the 2015 ending point are still considerably lower than they were before the pre-decline period.

The time has come for full recovery, and for the first increase above and beyond pre-decline prices. Value and affordability in Grand Rapids compare very favorably to real estate prices in similar cities. 2016 promises to be another great year with more inventory, more buyer choice and more market confidence. As home prices approach full recovery level, they will continue to increase at a reasonable pace as long as Grand Rapids continues to increase its appeal to students, tourists, entrepreneurs and businesses. The Grand Rapids housing market has been, and is still a great investment.