As you may have heard, the real estate market is in transition away from the historically low mortgage interest rates that have been available over the past few years. At the same time, if you’ve been seriously considering buying or selling a home in Rhode Island, you likely are curious about how the housing market is looking now and into the near future.
Being as reliable as weather forecasts, no one can predict with 100% certainty what’s going to happen in the housing market. At the same time we can look into what real estate experts are forecasting and make some educated estimates from there about the future.
But don’t forget, a housing market prediction can only give you an idea of what to anticipate if you buy or sell a house in the coming months. Never let it control your home buying or selling decisions; only your personal situation and finances should do that!
With that said, let’s take a closer look at what the market is doing.
Housing Market Overview
At a time of year when many homes are usually for sale, inventory is at historic lows. For people looking to buy a home in Rhode Island, even people with high income and excellent credit, the house-hunting process can be frustrating. And many who might typically look to cash in by selling their homes are choosing to stay put.
And, according to the Wall Street Journal, “U.S. mortgage rates reached their highest levels in more than 13 years, the latest sign of to the Federal Reserve’s campaign to cool inflation.” If there was any good news for buyers, it was that the number of homes for sale increased slightly over the previous few months.
Yet, there’s no question that low housing stock has made the Rhode Island housing market extremely competitive. Inflation also plays a role as housing costs around the country are rising and Rhode Island is no exception.
Now let’s hone in on the specifics of the current Rhode Island housing market.
What the RI Association of Realtors Has to Say
Here’s what the Rhode Island Association of Realtors (RIAR), as of July 14th, says about the current and near-term future of the housing market.
The June home sales statistics uncover a shifting housing market in Rhode Island, marked by home prices continuing to increase even with a five-month downward trend in single-family home sales.
The median price of single-family homes for sale in Rhode Island hit an all-time high increasing 11.7% last month compared to June 2021 of $430,000. Additionally, the monthly median sales prices have gone up each month from the prior year by 10% or more since July of 2020.
They note that rising interest rates are also adding to Rhode Island’s housing affordability troubles and are restraining Rhode Island’s single-family home sales, which fell year over year by 17.6% last month. Sales under contract in June but not closed by month’s end fell 25.4%, a sign the slowdown in activity will carry into the months ahead.
Agueda Del Borgo, President of the Rhode Island Association of Realtors said, “Last month, we experienced the lowest number of sales in June since 2014. We’ve turned a corner, but we still have quite some time to go before we reach a balanced market. We’ve gained a little bit on the supply side, but there’s still a significant shortfall.”
On a positive note, she additionally explained that the supply of homes for sale in Rhode Island last month rose significantly, for the fourth consecutive month, to 1.8 months. This is a marked increase from the low of .84 months of inventory earlier this year, but still far from the six-month supply that typifies a market balanced between supply and demand.
Del Borgo goes on to say, “Rhode Island still lags most other states in building starts and many homeowners who recently refinanced to low rates are hesitant to make a move and give up favorable mortgage rates. These are two major factors exacerbating the housing shortage.”
The Impact of Rising Mortgage Interest Rates
The Federal Reserve has raised its benchmark interest rate several times to fight high inflation. While the Fed doesn’t set mortgage rates, its actions affect interest rates for all borrowers. So, higher Fed rates coupled with inflation have pushed mortgage rates to about 5.7% for a 30-year fixed-rate mortgage.
Rates fluctuate daily, but overall, they’re about 2% higher than they were six months ago. Keep in mind, all these numbers will change as the experts crunch new data. But the bottom line is that in the second half of 2022, home sales will slow down some, interest rates will continue to go up, and home prices may keep on rising (but at a slower pace than in 2021).
“Sales last year (in Rhode Island) were fueled by low-interest rates. That market motivator is quickly dissipating. With the Federal Reserve hiking interest rates an additional three-quarters of a point this week, we’ll see the trend of multiple offers over asking price slow down considerably, which will, in turn, increase inventory further,” said Agueda Del Borgo, RIAR president.
The Good News
Real estate experts say buyer demand will stay strong in the second half of 2022. In May, home sellers received roughly 4 offers from buyers, which is lower than April but still about double the number of offers sellers received per month before the pandemic.
Homes sold in May spent a median of only 16 days on the market, and a little over half of the homes sold above list price. So, even though higher interest rates have lowered demand, homes are still moving quickly, which is a great sign for sellers. And one more thing—the number of people of prime home-buying age (25–34) is an all-time high.
It’s looking like the number of houses on the market in the second half of 2022 will continue to be low. But, unsold inventory would have to almost double to really cool down the hot market. When inventory is low, buyers have to work harder or wait a little longer to find their dream home. If you’re thinking about selling your home, now’s a great time!
There is a good chance homes will continue getting snatched up fast in the second half of 2022. This is great news for sellers who want to sell their homes fast. But buyers need to stay focused! You don’t want to drag your feet once you find a home that fits your budget and your family because it’ll likely be gone if you wait too long to commit.
A Final Word
Although it’s beginning to cool off, it’s still a seller’s market in Rhode Island. While homes continue to sell quickly, sellers have begun lowering listing prices to attract buyers. At the same time, inventory is still low, which could lead to bidding wars on prime properties priced appropriately. Remember, each city and town is different, so it’s best to consult with a trusted real estate agent who understands your local trends.
The Spectrum Real Estate Consultants Team is the top producing team of Realtors at Keller Williams Realty Leading Edge, completing over 650 successful transactions since 2015. Our mission is to provide our clients with world-class service while simplifying the Real Estate transaction through experience, technology, and effective communication.
Our team members are licensed and serve their local communities, and, like our valued clients, we own, renovate and manage properties throughout these markets, allowing us to truly understand the process, challenges, and benefits of real estate ownership. Our knowledge and professional experience allow us to identify opportunities and prevent unnecessary setbacks, in the end saving you time, money, and frustration. You can click here to get a look at our current listings of homes for sale in Rhode Island or download our mobile app for instant, anytime access. And, if you’re ready to move forward with buying or selling a house, let’s connect.