Realtors remain confident in R.I. housing market despite skeptics
By Mike Colias

Both in Rhode Island and nationally, a robust housing market has helped prop up an otherwise shaky economy in recent months.

And then came August.

Some economists, however, have speculated that the housing market might succumb too. The theory: High home prices, tighter mortgage lending and a flagging stock market could finally begin to weigh on the housing sector.

"Housing prices (in Rhode Island) keep going up because the inventory is so small," William B. Sweeney, an economics professor at Bryant College, said last month. "But now you have high prices, worker insecurity, and a possible recession. That's a bad combination."

Despite such fears, Rhode Island's Realtors say the state's market is showing no signs of weakness. "We're still out showing a lot of properties and buyers are still making offers," said Liz Mastin, vice president of sales at Hogan & Stone Real Estate, which has offices in Newport, Middletown and Providence. "And we haven't had any buyers-under-contract getting cold feet at all." Estelle Smith, president of the Rhode Island Association of Realtors, said she is hearing similar things from Realtors around the state. "The market continues to be strong," Smith said. "I've heard absolutely nothing but positives from Realtors throughout the state." That upbeat outlook is borne out in the association's most-recent statistics. In August, 936 existing single-family homes in Rhode Island were sold at a median price of $164,000. That's up from July, when 899 homes were sold with a median price of $154,000. During each month, the average home sat on the market 48 days. The Rhode Island market also posted strong second-quarter sales this year. Although the number of existing single-family home sales was down slightly from the same period in 2000, the median home price jumped from $132,000 in 2000 to a record $149,000. September statistics are not available yet, so the negative effects from the September 11 terrorist attacks have not been quantified yet. Although Realtors saw activity slow to a crawl in the week after September 11, many real estate agents say activity has resumed. "I think what you're going to see is a one-week to 10-day period carved out of the September (real estate) numbers," said Sharon Steele, owner of Sharon Steele Group and president-elect of the Rhode Island Association of Realtors. "But if the number of phone calls we've been getting is any indication, people are returning to normal." Steele said there is no way of telling how the fallout from the terrorist attacks might affect the state's housing market. But, she said, several market catalysts should help offset the uncertainty. So far the market has been buoyed by low mortgage rates. Interest rates on a 30-year, fixed rate mortgage average 6.72 percent, according to Freddie Mac's Primary Mortgage Market Survey, which was released September 27. Interest rates for first-time homebuyers offered by the Rhode Island Housing and Mortgage Finance Corp. have fallen more than one-and-one-half percentage points since last year and now stand at 4.25 percent - the lowest level ever, according to agency spokesman Chris Barnett. "What happened on September 11 doesn't seem to have had any impact on the real estate market in Rhode Island so far," Barnett said. "We won't know the long-term effects for some time, but I think demand is likely to stay strong, because we all have such a deep-rooted commitment to own our own home." Steele said the state's housing market could also get a boost from a possible shift away from big-city living - a phenomenon that has been espoused by some scholars and urban planners since September 11. Both Steele and Mastin say they have fielded calls in recent weeks from New York City residents who are interested in possibly relocating to Rhode Island. "I'm not suggesting people will make these kind of decisions right away," Steele said. "But I think people are becoming more interested in quality-of-life issues, rather than exacting every dollar they can out of their professional life. That puts Providence and Rhode Island in a very positive place." Still, drops in consumer confidence and individual stock portfolios don't bode well for a market that has seen home prices soar in recent years. Elizabeth Dellatorre, a mortgage broker at Greenwich Mortgage Corp. in Providence, said the firm's number of mortgages has waned dramatically in recent months. "Home prices have just gotten astronomical, so I think people are hanging onto their homes and instead they're taking out home-improvement loans or refinancing," Dellatorre said. "We're just not seeing many purchases right now." She added that refinancings are at "record highs" because interest rates have gone so low. Others say that the housing market can only resist the weak economy for so long. "This paradox - that of a general economy's growing weaker as the housing market becomes stronger - can't be sustained," wrote Robert S. Salomon Jr. in the October 1 issue of Forbes magazine. "Before long, a lot of folks will find that their can't-lose investment in property is a mirage." Salomon is principal of Stamford, Conn.-based STI Management and writes a column for Forbes.

Published 10/08/2001

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