NEWS

Signs point to easing of home prices, but not quite yet

Posted 5/25/22

By JOHN HOWELL

General Treasurer and candidate for the Second Congressional District Seth Magaziner knows how difficult it is to buy a house first hand. He’s been looking to buy something in …

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NEWS

Signs point to easing of home prices, but not quite yet

Posted

By JOHN HOWELL


General Treasurer and candidate for the Second Congressional District Seth Magaziner knows how difficult it is to buy a house first hand. He’s been looking to buy something in the Gaspee Plateau section of Warwick or in Pawtuxet Village.

“Something close to the center (of the state),”he said Friday at the 11th Annual CU 4 Reality Financial Education Fair hosted by Wave Federal Credit Union. Magaziner now lives in the First Congressional District. Even though residency in the district is not required to be a representative, Magaziner wants to live in the district should he win. He found something he liked, however, it sold for more than the asking price and its appraised value.

Given the Rhode Island Association of Realtors April report for single-family home sales that’s not surprising as the median sale price of single-family homes sold in the state was $420,000, a whopping 20.3% gain from 12 months earlier and the first time the median sales price has risen to $400,000 or above. Higher prices and an increase in interest rates have caused sales to decline compared to the previous year, for the third consecutive month, according to the association.  Sales data points to a 12.5% dip in sales compared to April 2021. Homes put under contract in April but not closed by month’s end, were also down by 20.2%, an indication that continued restraint in sales activity in the months ahead is likely.

Magaziner concludes the stock market has been good for so long that it has enabled investors to pay cash for houses thereby contributing to the lack of inventory and fueling higher prices.

But with the wobbly market, rising interest rates and inflation there are signs things are going to change.

“I think we’re starting to see the correction begin. Unaffordable prices are sidelining prospective buyers. The plus side is that as demand is reduced, the market will begin to rebalance. The negative side is that unfortunately, with the high price of rents as well, too many people are having trouble securing housing now,” Agueda Del Borgo, association president said in a release.

David Dupéré, Wave president and CEO wasn’t prepared to predict the bubble is going to burst, yet adds, “prices have got to come down.” He’s already seen the impact of higher interest rates on auto loans and mortgages. He said in some instances rates are 6 percent which in one recent case prompted the borrower to go for a home equity loan to buy a car.

“Bubble,” is not a word that Weichert real estate agent Robert Babigan applies to the market.

“This is not a bubble like 2008-2009,” he said referring to the financial crash fueled by unsecured mortgages. He doesn’t see housing prices falling to the point where home owners are “upside down,” owing more on their mortgages than what the property is worth.

“Valuations will level off,” he said. He maintained that people looking to invest in a home, as compared to those seeking to flip houses for a fast dollar, won’t lose in the long run.

Nonetheless, single-family housing sales dipped 2.4 percent in April from the previous month according to the National Association of Realtors. April sales were off 5.9 percent from April 2021.

A story appearing in the May 20 edition of the Wall Street Journal finds the housing market “still looks relatively hot by historical standards, and home –price growth remains robust.”  The story goes on to quote Lawrence Yun, chief economist for the National Association of Realtors “that higher mortgage rates have reduced buyer activity.” The average rate on a 30-year fixed rate mortgage was 5.25 percent as of last Thursday as compared to 3 percent a year earlier the story finds.

So far higher interest rates haven’t impeded buyer interest Babigan finds.

Over the weekend he held an open house for a property on Viscount Road in the Hoxsie neighborhood of Warwick. The seller received several offers over the $349,900 asking price and as of Monday he expected a deposit on the property.

With housing inventory low, Babigan finds “there is no lack of demand.”

According to the Rhode Island Association of Realtors report, Warwick led the state for single-family sales with 93, a drop of 17 percent from the 110 sold last April. While lower than the state average, the median price of a Warwick home was $325,500 up more than 13 percent from last April’s $287,000.

Neighboring Cranston had 51 single family home sales at a median price if $360,000, which is up more than 12 percent from $320,000 last April. Johnston recorded 28 sales for April, the same as last April. The median price climbed from $318,000 to $385,000.

Newport was the municipality recording the highest median price, $853,000 followed by Jamestown with $825,000.

Block Island had one sale for April that was for $2.2 million. As it was the only sale, the Block Island median price was $2.2 million.

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