Bitely to GRBJ: We’re getting back to normal — normal is stable housing

Sable Homes President John Bitely spoke with Grand Rapids Business Journal’s Pat Evans about the return of West Michigan’s housing market.

“We went through three years of not normal — an incredibly heated housing market — the economy itself was incredible,” Bitely told GRBJ. “We’re getting back to normal. Normal in West Michigan is stable housing, or they go up.”

Bitely said there are a few factors that will help the market weather any sort of larger national housing downturn. First is the approximately 6.5% 30-year mortgage rate is not that high in the grand scheme of things, beyond the past four years, he said.

Additionally, the economy in West Michigan is diversified with a shortage of employees across industries, which will continue to see people come to the Grand Rapids area. Along with an inbound migration in West Michigan, which is unlike much of the state, Bitely said the housing market is also impacted by the increasing lifespans of residents.

Bitely said lumber prices are starting to settle, but other material prices are still high or rising, including concrete, drywall and insulation. Likewise, transportation for those products is rising.

All those things, plus the still low supply of homes will help prevent a crash, he said.

“There is no reason to see the price crash we’ve seen before in (2004-05),” Bitely said.

The high home prices, however, will keep some previous potential homebuyers on the sideline. Bitely cited a National Homebuilders Association stat that historically 3% of new homes are used for rental. That number is now up to 11%, with 5% sold to investors and 6% held by the builders themselves.

While those are national stats, Bitely said that is happening in West Michigan.

“A bigger competitor is renting a lot of their homes and have been for two to three years now,” he said. “It looks the same as if they’re all sold. That makes for a nice mix, because sometimes rental communities lack the same care or don’t appreciate as quickly.”

Sable Homes also attracted renters, with Bitely using an anecdote about an executive-level employee moving to West Michigan and approaching the company to rent for a year. The next year, Sable Homes built the employee a house.

“That’s the type of thing that goes on more and more, and I’ve been in this for over 30 years. It used to be a rarity,” he said.

More housing used for rentals makes sense, as there is a generational trend toward renting longer into life.

“There are a couple of young generations more comfortable with renting, it’s a more mobile society that doesn’t want the same roots,” Bitely said. “It’s a market of supply and demand in action, they’re OK spending $2,000 to rent a home from a landlord. I joke that you’re paying a mortgage one way or another, whether it’s for yourself or a landlord. That’s up to you.”

Rentals are also easier for some with the rising mortgage rates, even if it is historically not that high. A renter can spend more of their monthly income on a rental than they could qualify for in a mortgage.

“If you don’t qualify to buy the home you want, but you can still afford to rent it, it cuts down on the ability to save for a purchase, but you’re in the home and lifestyle you want,” Bitely said.

The softening of the housing market thanks to the interest rate increase is helping clear the backlog in Sable Homes’ portfolio.

“We’re still selling homes. We were very blessed with that backlog of homes to be built, and we’re getting that work down, and it’s much quicker than it was, and we’re now able to build homes to sell,” he said. “We hadn’t done much of that for more than a year, because we had such a big backlog of pre-sold. Now that will help the market and give people more options.”

Read the entire story, here.

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