Higher interest rates and interest rate hike fears are beginning to weigh on homebuyers nationwide, but Realtors in Rhode Island towns report that sales are still brisk, even as they begin to slow due to overinflated home prices.

Smithfield

"This is a very nice town located in the center of Rhode Island," says Realtor Dave Miles, "and it has great highway access."

Observes Miles, "The market is still showing great strength even though it has slowed just a little and interest rates have jumped. A leading economist indicated that there was no need to worry about a housing price bubble with interest rate rising because he said 'We're already past a contraction in payroll employment, and jobs and income are in a growth mode so prices won't contract because the real economy is coming on strongly.' The increasing value of homes has had some effect in slowing the market, but well-priced homes still sell very quickly and many times for more than the asking price. Homes that are improperly priced will not see great activity and mostly will stay on the market until the asking price is lowered to reflect true market value. What these homes actually do is help sell the homes that are well priced."

Narragansett

Says Realtor Althea Rothmeyer, "We have excellent schools and beautiful Beaches. It's a good community for property investment. Rhode Island property owners are still reaping healthy returns-on-investment according to data released by the Rhode Island Association of REALTORS (RIAR). The median single-family home sales price was 11.9 percent higher than that of the same period last year."

Warwick and Cranston

"Warwick and Cranston are suburbs of Providence," says Realtor Steve Gillikin, "The major airport for Providence is located in Warwick. The cities for the most part are very urbanized with many smaller homes on smaller lots along with most of the major shopping in the state located in both cities. Western Cranston however is still rural with some existing farmland, but now mostly new subdivisions with larger homes in a higher price range. For those working in and around Providence as well as commuters from Maryland, most buyers find both of these cities very affordable with access to highways, shopping, the airport and also bordering Narragansett Bay for boating."

Gillikin advises, "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 some new listings are as high as 40 percent over the average selling price of similar recent comparable sales. In the suburb communities of Warwick and Cranston, right now there are 402 listings with an average asking price of $341,244. These listings have been on the market an average 44 days. There are 491 pending sales under contract with an average asking price at the time of the sales contract $255,722. Almost $100,000 under the average list price of those not sold. Those pending sales have been on the market an average 44 days. Finally, there have been 526 closed sales so far this year with an average selling price of $238,200 and on the market an average of 51 days until a contract was signed. That is a huge gap between average asking prices and average selling prices. Selling prices were up 22.37 percent in Warwick in 2003 over 2002 and 21.68 percent in Cranston.

He warns, "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. 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. In my opinion, prices have reached a peak. Home prices are getting out of reach of average Rhode Islanders' personal income."

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Published: June 15, 2004

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