Without a shadow of a doubt--the Rhode Island residential real estate market is back. Single family home sales are back to being quick and competitive in many communities around the state--from Newort to Barrington to Providence to East Greenwich. The bidding war is back--remember those days? Multiple offers, cash buyers and clients removing inspection contingencies just to compete? I have a cash buyer client in the high $300s on the East Side of Providence who has lost two bidding wars on properties in the last 10 days. Our strategy session after the second loss was simple--you have to pay more.
While condominiums and multi-family homes in many parts of the state are seeing increases in activity--those markets aren’t yet as robust. But single family homes-- especially in the bread and butter pricepoints between $250k and $600k (depending on the market)--mobbed open houses and multiple offers within the first 48 is not uncommon. And it’s true all over the state--all over the country. What a difference 9 months can make. Last October, I would never have predicted this.
The big factors: 1) Real estate is trendy. Americans love to talk, buy and sell property. With nationwide news stories ballyhooing its return, folks are diving in head first. 2) Inventory is extremely low. In other words, demand is rising, but the number of good properties coming on the market is decreasing. 3) Rates are still, well, ridiculously low. Interest rates of 3.5% mean that borrowing $ for a house is as close to free as you will ever see. I remember my mom telling me about 18% rates when they bought their first house.
This last week, I attended the William Raveis real estate convention at Mohegan Sun. The National Association of Realtor’s Chief Economist, Dr. Lawrence Yun, made three extremely important national forecasts: 1) Interest rates will rise to 5.5% by 2015. 2) Prices will increase 15% by 2015. 3) And inventory will remain low for the next 12-24 months. Arthur Chapman, Data Specialist for our local William Raveis team in Rhode Island, says, “Demand is significantly up year over year and we have the highest level of contracts per day since 2007.” He also notes that inventory is down 10% from 2012 statewide--but down much more in specific towns and pricepoints. It’s a perfect storm: rates are going up, prices are going up and inventory is staying low. So no matter which side of the buyer-seller fence you’re on, it’s a good time to get into the market.
Specifically, for buyers it’s a no-brainer. Get in before rates and prices go up. Simply put, it’s cheaper to buy a $300k house today than it will be in 2 years. But have your ducks in a row. Choose a buyers’ agent. Get educated up front. Have your mortgage approval in hand. And don’t flinch at the thought of paying over the asking price for the right property. For sellers, it’s not so simple. While the flurry in the marketplace may help you achieve more than your home is currently worth--it’s likely it will be worth even more in a few short years. Not a bad position for sellers either way. So do I dare say it? Yes, it’s back. It’s a sellers’ market once again.