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In January of 2011, Kent Co. had over 6,000 single family homes for sale.  We were in a typical market for this area with a fine selection of homes for any buyer.   In 2012, Forbes came out with their annual “best places to invest” list and the number 1 market listed was Grand Rapids, MI.  That kind of press doesn’t go unnoticed, and Forbes is read by investors worldwide.  Sure enough, starting in 2012, foreign money came rolling into West Michigan.  There were investors from all over the USA and even Russia, Iran, etc looking to get into the action.   Subsequently, single family homes started selling at a rapid pace and the number of absentee owners skyrocketed.   I’ve talked with several property managers who all confirmed the number of homes in their portfolio grew at a record pace.   West Michigan was becoming a rental market.

When an investor buys a single family home for sale and rents it out, it removes that home from the normal sale inventory.  Typically a home will sell and then reenter the market as people move up within 5-7 years.  However an investment home could be off the market for decades.  This type of situation can snowball as more and more homes are removed long term from the inventory and buyers keep coming into the market.  We saw this over the past decade.

So, entering 2020, the GRAR market was extraordinarily fragile.  Our inventory was very low and we really couldn’t handle anything drastic happening.  As you know in April of that year COVID became a thing.  No one was allowed to see the inside of homes in person.  Many lost their jobs or were forced to change jobs.  Mortgages got behind.  The economy was a mess.  Uncertainty became the norm.   This further impacted West Michigan’s housing dilemma.   Homeowners didn’t want sick people walking through their homes and with all the uncertainty decided not to sell even if they might have wanted to.  Only people with little choice ended up selling.

The problem is buyer’s keep coming.  COVID or not, people get transferred, get married, rents run out, etc.  There is always a steady flow of buyers.  So the demand remains unchanged but the supply continued to dwindle.   Now fast forward to 2022.   We have sellers who are in their homes and have outgrown them.  They’d love to trade up.  They know their house will sell instantly but where are they going to go?  There isn’t enough of a selection, and they don’t want to trade up and be unhappy so they don’t sell.   This is the heart of the issue.

As mentioned, in Januray of 2011, Kent Co. had over 6000 homes for sale.   By the end of 2021 that number had fallen to 586!

How do we fix it?  Well, there is a way.  We need to create inventory.  There is a very important part of the market that doesn’t exist right now due to government intervention.  Foreclosures were put on a moratorium for several months and there are numerous programs that are allowing people to still avoid foreclosure (such as adding your missed payments to the back of your mortgage).  Once these blockades are removed and the foreclosure market can start to move freely again it will create a very large influx of needed supply into the market.  Foreclosures typically need repair but there are numerous investors ready to snap these up and flip them for profit.  Those move-in ready flips are what we’re missing and will help fix the supply issues.   Once there is enough of a selection of homes the homeowners who have been waiting to sell will feel more comfortable moving forward and will put their homes on the market further helping the inventory situation.   Bottom line is, we need those foreclosures and the govt involvement is hurting the Real Estate industry.