Reduced Housing Inventory Results in Low Vacancy Rate and High Sales Prices in Springfield, Massachusetts
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.
The Springfield, Massachusetts Housing Market Area (Springfield HMA) in western Massachusetts consists of Hampden and Hampshire counties and has a population of approximately 630,400. The HMA is centered around the city of Springfield, which is the third-largest city in Massachusetts. The Springfield HMA is home to many public and private colleges and universities; about 11 percent of the HMA’s population is enrolled in college or graduate school compared with 7 percent nationally. Springfield is also considered to be the birthplace of basketball and is home to the Naismith Memorial Basketball Hall of Fame. A recent Comprehensive Housing Market Analysis on the Springfield HMA detailed the economic and housing market activity in the area.
Employment Growth Led by Education and Health Services
The Springfield HMA’s economy has been growing steadily since 2010, with nonfarm payrolls increasing by 1.1 percent annually to 336,000. Employment growth has reduced the area’s unemployment rate, which averaged 4.6 percent over the past year, down from 5 percent the previous year.
The education and health services sector has led employment growth in the area since 2010, and the report attributes this growth in part to the expansion of the Baystate Medical Center in 2012, which added 550 new jobs. The education and health services sector is the largest employment sector in the area; it added 1,100 jobs over the past year, leading all other sectors in job growth. Four of the 10 leading employers in the area are in the education and health services sector, including the leading employer in the Springfield HMA, Baystate Health System, with 9,250 employees.
Employment growth, however, was offset by losses in other sectors, including the leisure and hospitality sector, which lost 900 jobs over the past year because of the closure of many area hotels and reduced seasonal hiring. Other sectors with losses over the past year include the manufacturing sector, which saw a decline of 400 jobs; the financial services sector, which lost 200 jobs; and the information sector, which lost 100 jobs.
Continued Employment Growth Expected
Many large-scale construction projects are currently underway, such as the $950 million MGM Springfield casino, which will open later this year and add nearly 3,000 jobs. Other forthcoming projects, such as a $95 million manufacturing facility for China Railroad Rolling Stock Corporation, will continue to spur employment growth in the area.
Decline in Inventory Leads to Lower Vacancy Rate and Higher Sales Prices
The sales market in the Springfield HMA is slightly tight with a vacancy rate of 1.3 percent — a decline from the 2010 rate of 1.5 percent. The housing inventory declined by 1.5 percent over the past year, contributing to the low vacancy rate while also driving up prices and limiting home sales. More than half of the housing stock in the Springfield HMA was built before 1940, and more than 70 percent was built before 1960, when the area’s population reached its peak. Despite rebounds elsewhere in the economy, home sales remain below prerecession levels. Over the past year, the delinquency rate in the HMA was 3.9 percent, which is higher than the state and national averages of 2.2 percent.
The homeownership rate in the Springfield HMA is currently estimated at 62.6 percent, which is down from 63.2 percent in 2010. The overall decline in the homeownership rate since 2010 reflects the housing crisis and a consumer preference toward renting. Although this rate is lower than the national average of 64.2 percent, it is higher than the average for the state of Massachusetts, which is 60 percent.
The rental market in the Springfield HMA is also slightly tight with a vacancy rate of 4.2 percent. The apartment rental market is tight with a vacancy rate of 1.7 percent. The lower vacancy rate in the apartment market is because nearly 40 percent of the market is composed of small multifamily buildings and single-family homes built before 1940. Over the past year, 220 multifamily units were permitted, which is an increase of 29 percent from the previous year. Although most multifamily construction is concentrated in the city of Springfield, development activity is also happening in the surrounding cities of West Springfield, East Longmeadow, and Agawam.
Over the next 3 years, demand is estimated for 1,750 new homes and 660 rental units in the Springfield area. For more detailed information on the Springfield HMA, please see the recent Comprehensive Housing Market Analysis on the area.