Saturday, July 16, 2022
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The Rhode Island real estate market is a cacophony of conflicting data points. It now sits at the intersection of a post-COVID hangover, coupled with rising interest rates and continued skyrocketing prices.
And, we may be headed for another major interest rate hike. The Federal Reserve is looking at a 75 to 100 basis point increase at its September meeting to try and cool America’s blistering inflation – now at a 40-plus year high — 9.1%
“It’s almost like the Fed is trying to figure something out, and they don’t know the whole picture. Real estate is driving inflation for sure because people are competing for properties and those properties are bidding way up and above what they listed for, so the prices have been growing over the past five years, not just the past two years,” said Robert Rutley of Mott & Chace on GoLocal LIVE.
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“There’s no supply — we have a million millennials [nationally] out there, 25 to 35, looking for their first home, and there’s nothing to buy,” said Rutley.
“If we’re raising interest rates, it makes it more difficult for people to purchase homes, and investors that are buying multi-unit properties at higher interest rates are going to pass on that extra cost to their tenants,” said Rutley. “So not only is this knocking quite a bit of people out of the housing market — the ones that need to have mortgage lending and have tighter budgets — but it’s also going to be pushing people out of the rental market as well because they won’t be able to afford uh the new prices for a lot of multi-family.”
New Record – Median Price of a Single-Family Home in RI, Now $430,000
At $430,000, the median price of single-family homes in Rhode Island increased 11.7% last month compared to June 2021, hitting an all-time high.
Monthly median sales prices have gone up each month from the prior year by 10% or more since July of 2020.
Rising interest rates are adding to the state’s housing affordability woes and suppressing Rhode Island’s single-family home sales, which fell year over year by 17.6% last month. Sales under contract in June but not closed by month’s end fell 25.4%, a sign the slowdown in activity will carry into the months ahead.
“Last month, we experienced the lowest number of sales in June since 2014. We’ve turned a corner, but we still have quite some time to go before we reach a balanced market. We’ve gained a little bit on the supply side but there’s still a significant shortfall,” said Agueda Del Borgo, President of the Rhode Island Association of Realtors.
Del Borgo said that there was a 1.8-month supply of homes on the market last month, up from the low of .84-months earlier this year, but still far from the six-month supply that characterizes a market balanced between supply and demand.
“Rhode Island still lags most other states in building starts and many homeowners who recently refinanced to low rates are hesitant to make a move and give up favorable mortgage rates. These are two major factors exacerbating the housing shortage,” said Del Borgo.