Rhode Islanders hoping for the real estate market to return to pre-pandemic levels may need to reset their expectations. The housing market in Rhode Island has seen significant changes in the past two years, with soaring home prices and fierce competition becoming the new norm. In this article, we will explore what the housing market in Rhode Island may hold in 2022, based on insights from a real estate agent.
The Current Landscape
As of the previous month, the median price for a single-family home in Rhode Island stood at $375,000, reflecting a 16% increase compared to the same period in 2020. The surge in prices can be attributed to out-of-state buyers and a growing demand for more living space. However, the number of available properties has significantly decreased. In November 2020, there were 300 fewer single-family homes on the market, and the current inventory is less than half of what it was in 2019.
The multifamily and condo markets have experienced similar trends. The number of multifamily properties listed last month was 33% lower than in November 2020, with prices increasing by 17% compared to the previous year. Similarly, the market for condominiums saw a 38% decrease in inventory, accompanied by a 17% rise in prices.
Outlook for 2022
What can we expect in the coming year? According to Agueda Del Borgo, a prominent real estate broker and president of the Rhode Island Association of Realtors, the winter months are likely to remain strong as buyers aim to secure low-interest rates. It is possible that prices will continue to appreciate, albeit at a slower pace than before.
The key question is whether the high prices will incentivize more homeowners to put their properties on the market. Del Borgo anticipates a typical increase in inventory during the spring season, but she does not foresee a return to pre-pandemic levels anytime soon.
The Dilemma for Sellers
While rising prices should theoretically encourage more sellers, the scarcity of available homes may deter some from making a move. This creates a feedback loop where potential sellers hold off, waiting for even higher prices. In response to this dilemma, some buyers are exploring alternative options. They may consider renting temporarily, looking at condos, or purchasing multifamily properties where they can live in one unit. However, even in these markets, choices are limited.
The Influence of Out-of-State Buyers
The presence of out-of-state buyers is still significant in the Rhode Island housing market. While the influx may not be as dramatic as it was in the spring of 2020, nearly a quarter of all single-family transactions and over half of the million-dollar sales last month involved buyers from outside the state.
Rhode Island vs. Massachusetts
Despite the steep increase in housing prices, Rhode Island remains comparatively affordable when compared to its neighbor, Massachusetts. The median sale price for a single-family home in Massachusetts last month was $510,000.
The Impact of Remote Work
The shift to remote work in 2020 played a significant role in the surge of real estate prices. Many people have opted to live farther from their workplace, leading to increased demand for larger living and work-from-home spaces. While the economy has reopened, and city centers have regained vitality, the impact of remote work on real estate remains.
"The pandemic has permanently impacted how we live and work," says Del Borgo. "While some employers may require in-person attendance, others are adopting hybrid models, where commuting to major cities like Boston is reduced to a few days a week."
Possible Policy Changes
To address the shortage of available housing, state leaders are exploring policy changes that could increase the supply of homes. These include allowing the construction of tiny homes or accessory dwelling units on single-family lots. However, until these changes take effect, the current housing market situation is likely to persist.
In conclusion, the Rhode Island housing market in 2022 is expected to maintain its upward trajectory, albeit at a potentially slower pace. While the high prices may deter some sellers, buyers can explore creative options to navigate the market. As the impact of remote work continues and state-level policies are considered, it remains essential for buyers and sellers to approach the market with patience, adaptability, and a clear understanding of the bigger picture.
— panderson@providencejournal.com On Twitter: @PatrickAnderso_