Real Estate sales holding steady in Rhode Island; Market surges and slumps in surrounding states

By Bethany Costello

The current economic slowdown appears to be having no effect on the Rhode Island real estate market. According to the Rhode Island Association of Realtors, combined sales of single-family homes, condos, and multi-family dwellings in 2001 topped a record mark that had been previously set in 1999. The number of dwellings sold in Rhode Island from Jan. 1 through Dec. 31 totaled 12,653 -- just ahead of the previous record of 12,551 set in 1999. "Real estate continued to be a good investment, even in a recession," said Sharon Steele, president of the Rhode Island Association of Realtors. "We were pleasantly surprised that these sales continued to remain strong, even after the Sept. 11 tragedy and the ensuing economic downturn. Spring is traditionally a strong sales period and we're hopeful that home sales will remain steady into the first quarter of this year." Ron Phipps, president of the Warwick-based Phipps Realty and Relocation company, credited strong sales this year to the growing number of homebuyers moving into Rhode Island from surrounding states, especially Massachusetts. "The Boston market is so much more expensive than we are," he said. "Now that we have the transportation links in metro Providence we have become a bedroom community for Boston." In fact the average selling price of a home in Rhode Island last year was $156,000 compared to the Boston metro area that saw a median selling price upwards of $400,000. "People from Massachusetts historically have moved to New Hampshire for tax reasons," he said. "But our tax structure is only modestly more, and now I think people are gravitating toward quality of life issues, and we have that." Steele agreed. "The spillover effect from Massachusetts is clearly a factor," she said. "Their median price makes ours look like the bargain of the century. You can commute using the Providence train station and you can buy more house for the money." Another driving force behind the booming market, Steele said, is low interest rates. "The fact that we have had the best interest rates, consistently low interest rates, for the longest period time in recent history has been a compelling reason to buy," she said. The rates have been especially good, she said, for homeowners looking to "buy up" as single-family homes in Rhode Island have seen an appreciation rate of 23 percent over the last two years. Condominiums have appreciated by 47.6. "In times of rising prices where there is considerable appreciation if you are a seller looking to move up, you are in a very enviable position," Steele said. "It's the direct result of what we call demand-supply economy. The appreciation in your house and then the sale price becomes the down payment on a new home. It's allowing people to go after smaller mortgages because they are bringing more to the table." What Rhode Island lacks, both realtors agree, is an inventory of homes to sell. "Historically, we have around 10,000 units on the market," Phipps said. "When the banking crisis hit in the early 1990s, there were more than 13,000 homes on the market. Right now there are 2,250 houses. Last year we sold over 12,000 units, so when you have an inventory of only 2,250 it's absorbed very quickly." So quickly, that the average home for sale in Rhode Island was on the market for only 53 days. "When there is a limited supply where demand outstrips supply, obviously people are willing to pay more, but that is also reflected in the days on market statistics," Steele said. "In 1999, the average days on market was 96 days, in 2000 it was 70 days and in 2001 it's 53 days. That is virtually half the time it was two years ago. The same statistics are paralleled in multiple units, and condominiums." How long can the trend continue? Both Phipps and Steele say there are no signs of it stopping any time soon. "We have had no winter to speak of and so the seasonal slowdown that would usually be in play right now doesn't exist," Steele said. "As long as we have a recession that is shallow and short-lived we are predicting another record breaking year for 2002." Phipps agreed. "I don't think that this economic enthusiasm will remain quite as robust as it is now over the long haul," he said. "But the fundamentals are such that I think we will consistently march forward."

Published 02/04/2002

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