It's a good opportunity for local buyers to get in on a soft housing market with low interest rates in Providence, Rhode Island, says a local Realtor.

"Providence has experienced a wonderful transformation over the past 10 years from a city with darkened and empty streets, to a bustling metropolis filled with light and people at all hours," says Realtor Steve Gillikin. "New downtown city mall and entertainment complex, world-class theater, five-star dining and entertainment with plenty of new hotels to serve the public, new riverwalk and wonderful waterfront are available, along with affordable housing compared to Connecticut and Maryland. There's high-speed rail. What more can you ask for?"

About the market, Gillikin says, "Hopefully the real estate market will begin to change this spring. Homes are not selling nearly as quickly as they were last year. There still is a great demand, and interest rates are still at an all-time low, however the asking prices on average are now 40 percent over the average selling price in most locations. Even though on average selling prices are up 22 percent in Rhode Island over 2002, the asking prices are up more than 60 percent from a year ago.

He explains, "Providence is split into two distinct areas - the East Side, which is where Brown University is located along with the Rhode Island School of Design. This is a much more expensive part of the city. Right now on the East Side, there are 50 listings with an average asking price of $725,000. These listings have been on the market an average 85 days. There are 37 pending sales under contract with an average asking price at the time of the sales contract $457,000 - almost $270,000 under the average list price of those not sold. Those pending sales have been on the market an average 66 days. Finally, there have been 193 closed sales so far this year with an average selling price of $484,000 and on the market an average of 65 days until a contract was signed. That is a huge gap between average asking prices and average selling prices on the East Side.

"In the rest of Providence," continues Gillikin, "there are 189 active listings with an average asking price of $210,000 and 108 day on the market. There are 126 pending sales with the asking price at time of sale being $153,000, and 55 days on the market. There were 555 sales so far this year with the average selling price of $154,000, and only 48 days on the market. Average selling prices on the East Side are up 8.2 percent over last year and up 22.3 percent in the rest of Providence. The inventory of available homes for sale is increasing, and many buyers are pulling out of the market for now because they just can't afford it or are just plain refusing to pay the high asking prices of some sellers. Buyers were having a tough time finding a decent home at a price they could afford. Some have been looking for over a year. Good single-family homes priced under $250,000 are almost nonexistent. Even multi-family homes that just two years ago were selling for $120,000 are now on the market for more than double that price."

He warns, "In most cases, neither rents nor buyers income have remotely kept up with the asking prices and with a rise in interest rates, more and more buyers are driven out of the market. These days, serious sellers have been reducing their initial asking price and the not-so-serious sellers are just taking their homes off the market. Homes are staying on the market on average 60 days compared to about 30 back in June. This also is reflective of those high initial asking prices. In my opinion, prices have reached a peak. Home prices are getting out of reach of average Rhode Islanders' personal income. Prices can't really just keep going up and up. Lenders are having a hard time justifying some selling prices with appraisals and more and more sales are falling out due to low appraisals. I've seen a larger number of homes withdrawn off the market in the last month than I've seen all year. This is a reflection of sellers realizing they will not get their high price anymore and never really had any real motivation to sell other than to believe they would cash in. I feel the inventory will continue to increase and asking and selling prices will moderate."

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Published: March 4, 2004

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