As the summer draws to a close, the slowdown in the Rhode Island housing market has settled in, with a drop of about 3 percent in both the median house price and the number of houses sold in the first half of this year, according to statistics from the state Realtors’ association.
The condominium market has fared a little better, and a little worse: the median sales price dropped nearly 8 percent, but the number of sales increased 5 percent, in the first half of the year, the Rhode Island Association of Realtors reports.
The number of houses for sale in Rhode Island through the state Multiple Listing Service this month is 6,874, up from 6,473 at the same time last year, and 4,715 in September 2005. And the condominium inventory is 1,793, up from 1,771 last year and 1,028 in 2005.
According to Alan Pasnik, an analyst with The Warren Group in Boston, inventory is a key statistic to watch in tracking the real estate market. “As it goes up, you can be pretty sure that prices will go down,” he said.
Recent numbers from The Warren Group, which collects data on all real estate sales, not just those made through Realtors, indicate that July sales of single-family houses in Rhode Island dropped 4.4 percent, and year-to-date sales [January through July] fell 6.3 percent, from last year. The Warren Group said the median house price fell 4.1 percent in July, from $280,000 to $268,500; and the year-to-date median house price fell 2.8 percent, from $270,000 to $262,500.
The Warren Group also reported that condominium sales year-to-date were up 1.7 percent, though the median price dropped 4.3 percent, to $225,000. In July, condo sales were down 4.2 percent from a year before, with 207 condo sales this July compared to 216 in July 2006, and the median price dropped 2.5 percent, to $224,200.
Of course, statistics just give a general overview. Some properties sell relatively quickly, while others linger on the market for a year or more. Realtors say pricing a property correctly is the most important action for owners interested in a swift sale.
Housing economists often refer to real estate prices as “sticky,” because sellers are so averse to price cuts that it takes time for prices to respond to market conditions. And some sellers resist advice to cut their prices even as months go by without any interest in or offers for the property. Some sellers even blame their real estate agents, but “the Realtors don’t really control what’s happening out there,” said Cecile Cohen, president of the Rhode Island Association of Realtors. “It really is the buyer that controls the market — what they are willing to pay.”
Cohen said that although the five-year housing boom that nearly doubled the average real estate price in Rhode Island ended in 2005, many sellers still haven’t come to terms with the fact that it’s now a buyer’s market. “There are always sellers who aren’t willing to believe that the market isn’t booming,” Cohen added. “They are really in the position of being behind the market.”
“I think it’s going to be very tough sledding for the next couple of years,” said real estate attorney Robert Goldman, of the Providence firm LaPlante Sowa Goldman. Goldman is also a former general counsel for the state realtors’ group.
Goldman said the recovery of Rhode Island’s housing market could be hampered by rising foreclosures and the credit crunch caused by freefall in the subprime mortgage market.
“There’s no question that it’s affecting all the credit markets, not just the mortgage market,” Goldman said of the subprime crisis. “As a practicing conveying attorney in Rhode Island … title work and closings, across the board, there’s been a tremendous slowdown in the amount of work.” Goldman said he has seen a significant decline in just the past month.
“The entire subprime market is basically gone right now,” he added.
Goldman said Congress may act to increase the limits for government-backed loans to help sustain the jumbo loan market. Jumbo loans, which exceed the limits for government-insured loans, and generally come with higher interest rates as a result, have been harder to obtain in recent months, as lending guidelines have tightened, Goldman said.
Goldman said he believes there will be a “second wave of implosion” in the real estate markets that have seen price depreciation of 20 to 50 percent since the boom ended. In markets where prices have plummeted so far so fast, more people who have refinanced and borrowed against equity that is no longer there will be in trouble, he said.
“Foreclosures, the number of foreclosures are only going to escalate in 2008,” Goldman said. “There’s going to be a real problem.”
But Cohen and Ron Phipps, president of Phipps Realty Inc., of Warwick, said they’re seeing stabilization in sales and prices in Rhode Island after the correction of 2005.
“All real estate is local,” Cohen said. “What’s happening in California, Nevada, Michigan or Florida — it isn’t necessarily what’s happening in Rhode Island.” She said New England was one of the first regions to start seeing decreases in the market, and she expects it will be among the first to climb out of the slump.
Phipps admitted that the market correction “will be a little more arduous” because of the impact of rising foreclosures and the resulting credit constriction.
Nevertheless, Phipps said there are buyers in the market who are creditworthy, but they are “savvy” and will not pay more than what they think a property is worth. Often they encounter sellers who refuse to negotiate, he said. Phipps said he has been involved in situations as recently as this month in which sellers rejected offers from buyers outright, without making any counteroffer, because the prices were so far below their expectations.
“We still have sellers who are wrapped in nostalgia,” he said with a sigh. “If you really don’t want to sell … if you’re waiting for the exuberant buyer who will buy anything … it may make sense to step back and say, ‘I should wait a couple of years.’ ”
Joy Sawyer, an interior designer, has been playing the waiting game for more than 18 months. She bought a house in 2004, at the height of the boom, in North Kingstown’s coastal Poplar Point neighborhood. Last year, the house went on the market because her husband’s job took them to Albany, N.Y., where they have been renting a one-bedroom apartment. Their North Kingstown house remains unsold, so they plan to return to Rhode Island this month and live there until it does sell. “We got stuck in one of those places that you never want to be,” she said.
Sawyer’s husband, who works for an architectural engineering firm and travels quite a bit, can work from Rhode Island, but his company’s headquarters is in Albany. Sawyer said her husband’s employer has allowed this accommodation because of housing market conditions.
Sawyer’s house is now priced at $939,000, but was first listed at about $1.1 million. “They’re just aren’t that many people who are looking in our price range,” she said.
Having a house on the market for 18 months has been an emotionally draining experience, Sawyer said. “It’s like being pregnant,” she joked. “You talk about it all the time.”
Christine Dunn, Providence Journal September 16, 2007
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