Can you buy a home in RI? What inventory and interest rates mean for homebuyers this spring.

Wheeler Cowperthwaite, The Providence Journal
·5 min read

High prices and increased interest rates continue to depress the residential real estate market as it heads into what is normally spring busy season.

Few listings and fewer sales are a trend that has been brewing for the first three months of 2023. Sales of single-family homes in the first quarter are down 32% compared to the same time period in 2022, while the median selling price is up slightly, according to a new quarterly report on sales released by the Rhode Island Association of Realtors.

The drop in sales was a trend seen across all three residential sales types tracked by the association. Condo sales were down 39% in the first quarter and multi-family homes were down 38%.

The slowdown in sales comes as the state has tried to boost the market for first-time home buyers by offering $17,500 house buying grants that can be used toward down payments and closing costs.

Rhode Island Association of Realtors President Bryant Da Cruz said the tight supply and few sales is a trend being seen across New England but he is hopeful that the market will begin to open up but the recent announcement by the Federal Reserve that it will once again raise interest rates does not bode well for bringing down mortgage rates, nor does the national fight over the debt limit and the possibility that the country could default on its debt.

Little supply with average demand means prices remain high

The lack of houses on the market is the biggest symptom of what is wrong in the current housing market, real estate agents interviewed for this story said.

A lack of housing inventory is not a new problem. People began removing their houses from the market when the pandemic started, but until recently, interest rates were dropping to the lowest levels ever seen, around 2.5% to 3%, near the rate of inflation the Federal Reserve wants the country to be at, 2%.

Bryant Da Cruz
Bryant Da Cruz

The cheap cost of borrowing helped drive up housing prices as taking out more principal meant only minor increases in monthly mortgage payments. The median cost of a single-family house in 2019 was $250,000 and now, it is around $400,000.

Housing prices: $400K is the new median selling price of houses in RI. What does it actually buy?

In March, 557 single-family homes sold while 905 were listed for sale. The last March to have that few sales was in 2011. Even then, the number of houses actually for sale was 5,655 - six times the number listed in March 2023.

Selling becomes unattractive in a world of high prices and interest rates

Real estate agent Robert Shirley said there just isn't a lot on the market and many people who might otherwise think about selling are spooked by the prospect of giving up low interest rates on their current mortgages if they sell.

Buying your first home in RI? The state may give you $17,500 for your down payment

"It's a vicious cycle," he said. "When interest rates went up, people stopped being so eager to buy and combined with the lack of inventory, it's a slow down."

Da Cruz said there just are not enough housing units in Rhode Island and people choosing to not list their homes is exacerbating the problem.

"We've got to open up the faucet," he said.

Multiple agents interviewed for this and other real estate stories in the past few months have described it as a "death or divorce market," meaning the only homes being listed are the result of a death, a divorce or other life-changing events.

Some prices show signs of inching back down

Shirley is the listing agent for a $919,000 house in Cranston right on the river and next to a marina. While he tried listing the house last year for over $1 million, he has dropped the price because rising interest rates have eaten away at people's buying power.

What's $1 million worth? If you had a million dollars, what RI houses for sale could you buy?

"It's a beautiful property, overlooking the water," he said.

Da Cruz said interest rates may be higher but current homeowners looking to upgrade should consider how much equity they already have in their house, likely worth a lot more than they originally paid, and instead of paying attention to interest rates, look at what a monthly mortgage would cost.

"If you can, maybe you should buy now," he said. "We don't know if prices will come down again."

How far does your money go now?

Since January, the Providence Journal has been writing about the increase in housing prices and turmoil in the housing market through a series about buying power. At the beginning of May, we wrote about what $1 million buys, and found it was a few vacant lots, some new builds and houses in nice locations.

In January, we wrote about the current median selling price of a single-family home, $400,000. In February, we wrote about what $250,000 gets, the pre-pandemic median selling price for a house.

In March, we started looking higher in the market, $700,000 houses.

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Reach reporter Wheeler Cowperthwaite at wcowperthwaite@providencejournal.com or follow him on Twitter @WheelerReporter.

This article originally appeared on The Providence Journal: House sales in March 2023 continued a downward trend in RI