January 24, 2023

“Da Cruz further pointed out that current mortgage rates are just under the 50-year historic average so while they seem high compared to the historically low rates of recent years, they are not out of range of the norm. Future rate declines in 2024, which many economists are now predicting, should keep rates below the historic average.

In other areas of the market, sales of multifamily homes dropped by 6.2% from 12 months prior and the median price rose by 10.3% to $482,500. Pending sales fell only 3.7%, an improvement since the beginning of the year when they were down more than 40%. Sales in the multifamily home market have been fueled by investors looking to capitalize on rising rents as well as multigenerational buyers, who now make up 14% of all buyers nationwide."

While costs are up, real estate remains one of the best long-term investments. In addition to providing a place of shelter and comfort, it’s a great wealth builder. That’s why it’s so important that we find avenues to give everyone access to home ownership,” said Bryant Da Cruz, President of the Rhode Island  Association of Realtors.

In other areas of the market, at  379,900, the median price of condominium sales was 10.3% higher than that of September 2022, while closed and pending sales fell 14.6% and  .4%, respectively. While sales of multifamily homes fell by 12.3%  year-over-year, and pending sales dropped by 14%, the median price of  sales eclipsed other areas of the residential market at $477,500. 

Rhode Island’s multifamily home sector also saw an increase in median price compared to August 2022 to $475,000 from  $424,500, but like the single-family home market, sales continued to fall. Closing activity dropped 33.8% from the prior year and pending sales decreased 8.3%. Only 204 multifamily homes were on the market at the beginning of September, leaving a 1.7-month supply of properties for sale.

The rate of decline in closed and pending sales activity fell significantly in the condominium and multifamily home markets,  possibly a sign that supply and demand is becoming more balanced.  However, low inventory fueled by Rhode Island’s lagging housing  production and homeowners staying put to keep record-low interest rates,  will likely keep prices high. 

At $500,000, the median price of multifamily home sales represented an 11.1% increase from 12 months earlier. Completed sales dropped by 25.2% and pending sales fell by 26.6%. With a 1.5-month supply of properties on the market, the investor-driven multifamily home sector had the least amount of inventory available.

“Multifamily homes have wide appeal for investors. It’s no secret that rents have skyrocketed and with mortgage rates rising, the supply of prospective tenants is growing,” commented Da Cruz. 

“Though the median home sales price nationwide has been declining, the opposite is happening in Rhode Island. The rate of increase began to taper off in the past year however, so Rhode Island’s trends are most likely just running a bit behind the rest of the country. Even if the price appreciation continues to moderate, with just 1.4 months of inventory on the market, prices aren’t likely to decline significantly barring a significant economic shift,” said Bryant Da Cruz, president of the Rhode Island Association of Realtors.

Sales activity continued  to decline from the prior year, falling 12.1%, and pending sales – those  likely to be completed in the next one to two months – fell by 15.6%  from June 2022, the 18th consecutive month of year-over-year declines.

In  recent months, the condominium market has seen significant annual gains  in median price. June’s price of $376,450 represented a 17.5% gain from  June 2022. Both completed and pending sales fell just over 16%  year-over-year.

The multifamily home market, which includes homes  with two to four units, realized a median price of $500,000 in June, a  16.3% gain from 12 months earlier. Sales, however, slowed by 42.3% and  pending sales dropped by 26.2%

“Thankfully the Federal Reserve paused  any further interest rate hikes in June. With shelter costs being one  of the main factors driving inflation, anything that helps keep home  affordability within reach bodes well for the housing market,” commented  Da Cruz. 

At $440,000, the median price of multifamily home sales beat the median price of both single-family homes and condominiums. May’s median price reflected a 2.3% year-over-year gain. Closing activity dropped by 36.7% from 12 months earlier and pending sales fell by 38.1%.

“Investor demand for rental inventory is growing throughout the country and Rhode Island is no exception. Once a property comes on the market, it goes under contract immediately,” said Da Cruz, who explained that the average multifamily home sales process took only 24 days in May.

 Sales activity fell 33 percent and pending sales fell 42  percent in the multifamily home market.  The median price of multifamily homes  held steady at $450,000 for the  third consecutive month, which represented a  5.9% gain compared to  April 2022.  Listings fell by 32.2% with only 116  multifamily homes  available for sale statewide. 

Sales of multifamily homes fell 26.7% with only 135 properties on the market statewide.  At $450,000, the median price of multifamily home sales rose 13.4%, the only sector of the residential market that continued to see double digit appreciation.

“While inflation is showing signs of cooling, rents continued to be an outlier and were the most significant contributor to inflation last month. Multifamily homes, always popular with investors, are in even more demand with the allure of the continuous rise in rents,” said Da Cruz.

Pending sales for single-family and multifamily homes and condominiums dropped 25, 39, and 38.3% respectively, foreshadowing a slow start to the spring sales season. 

The multifamily home market saw the largest increase in median sales price last month due to high investor demand for rental properties. A  9.8% year-over-year gain resulted in a median sales price of $450,000.  With only 147 listings statewide, closed sales fell 52.7% and pending sales dropped 37.7%.

“Given that housing is such an important economic driver, we’ll be cautiously watching what happens to the rates following the recent bank closings as we head into what is typically our busiest time of the year. Many economists are now predicting a  lower-than-expected rate increase when the Federal Reserve meets next  week. Mitigating mortgage rate increases is always good news for the  housing market,” commented Da Cruz. 

In the multifamily home market, sales activity fell by 36.6%  year-over-year and those under contract but not yet closed by the end of  January dropped by 42.4%. Even with the fall in activity, the median price of $440,000 represented a 10% annual gain, the highest of all sectors.

“In today’s market, with its rising rents and scarcity of home ownership options, investing in multifamily properties makes perfect sense. Even at today’s higher prices, in most cases the return  on investment is there,” said Da Cruz. 

“The  supply of homes for sale is historically low and that should protect  homeowners from any sudden or significant drop in values. If thinking  about selling however, they should follow the advice of a Realtor to  price realistically. While the ratio of original list price to sales  price is still 99%, the days of multiple offers coming in thousands of  dollars over asking price are over,” said Bryant Da Cruz, 2023 president  of the Rhode Island Association of Realtors.

Sales activity  tumbled most in the multifamily home market, dropping 49.4% compared to  12 months prior.  The median price of multifamily home sales in December  saw the highest gains of all housing types, however.  The price of  $429,900 represented a 10.2% gain from the $390,000 median price  realized in December 2021. Pending sales fell by 44.9% year-over-year  and the average days on the market climbed by 9.7%, another indication  of slowing activity in the months ahead.

“While we don’t expect  to see a big swing in home values in 2023, activity in the housing  market will be largely affected by inflation, consumer confidence, and  what happens with interest rates. Our state’s ability to lessen the  impact of our housing shortage by lessening the impediments to the  construction of workforce housing, will also be key in regaining  normalcy to the market over time,”  commented Da Cruz.

The number of single-family homes on the market in November fell by 5.1% from November 2021, leading to a 1.5-month supply of homes for sale. A housing market balanced between supply and demand typically has a six-month supply.

Condominium sales followed suit with a 34.9% drop in sales activity in November and a 43.4% drop in pending sales. The median sales price rose to $330,000, a 12.4% year-over-year hike.

Likewise, multifamily home sales declined 36.6% and pending sales dropped by 46.5%. November’s median sales price rose by 3.9% to $400,000.

“Looking ahead to 2023, we expect interest rate hikes to eventually subside, which will help with some of the affordability issues buyers are facing. We must also find ways to increase our housing stock in Rhode Island, the shortage of which has now reached a critical level,” said Da Cruz.

In the multi-family home market popular with investors, the median sales price rose to $437,500, a 15.1% hike as the number of listings fell 25.3% from 12 months earlier.

Economic uncertainty also helped fuel a sharp drop in multifamily home sales, which plummeted 44.7%. Pending sales also dropped by 43.6% from 12 months earlier, indicating a continued slowdown in the months ahead.

The Rhode Island Association of Realtors reports year-over-year changes to avoid fluctuations due to seasonality. The Association reports median sales price rather than average price to eliminate the swings in value caused by significant outliers. The data is pulled from all Realtor-assisted transactions within the State-Wide Multiple Listing Service, a subsidiary of the Rhode Island Association of Realtors. 

The number of single-family homes sold last month in Rhode Island plummeted  20.2% from 12 months prior. According to a report released by the Rhode  Island Association of Realtors and its subsidiary State-Wide Multiple  Listing Service, the median price of those sales rose 8.1% to $416,000  from $385,000 in September 2021.

Trends in other sectors of the market were even more significant. Sales in the condominium market fell  32.2% year-over-year and the median price rose to $344,500, a 27.6%  hike. Multifamily home sales dropped 37.3% and the median price rose  11.8% to $425,000.

“The pandemic brought vast numbers of buyers  from out of state which further depleted an already low inventory of  homes for sale. Now, with mortgage rates rising rapidly and the threat  of recession on the horizon, the housing market has slowed  considerably,” said Agueda Del Borgo, President of the Rhode Island  Association of Realtors. 

At $424,500, the median price of multifamily homes continued to be the highest of the three sectors, largely driven by demand from investors seeking to capitalize on rising rents. Days on market fell to 25 from 29 in August 2021, a 13.8% drop and closed sales fell by 10.8%.

“In the past five years, the median cost of multifamily homes has increased 93%, compared to 56% for single-family homes and 42% for condominiums."