Property values up, but waterfront may take hit

John Howell
Posted 10/6/15

It will be another couple of months before those doing a full revaluation of city properties start establishing property values. But local Realtors needn’t wait to get the big picture.

They have …

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Property values up, but waterfront may take hit

Posted

It will be another couple of months before those doing a full revaluation of city properties start establishing property values. But local Realtors needn’t wait to get the big picture.

They have seen home prices increase, especially since this summer. Yet they also know some of Warwick’s most desirable real estate – homes along its 38 miles of shoreline – have lost value and, in some cases, aren’t selling.

The bright picture, according to Robert DeGregorio of the Slocum Agency, is that the home market is showing signs of strength. He said distressed sales are down, prices are up, and the number of days a property is on the market has decreased.

DeGregorio said the real estate market is unlike the stock market, which can dive and then soar all within a week. He said the real estate market has taken years to recover, and he’s seeing an “upswing” especially in the sale of single-family homes in the range of $175,000 to $250,000.

Bruce Lane, president of the Rhode Island Association of Realtors and of Lane Real Estate Group, said homeowners are excited about recouping some lost equity in their properties.

To measure how values have moved upward, Lane looked at first-time homebuyer choices in Warwick for 2012 and then compared similar properties in today’s market. He compared single-family homes of 1,100 to 1,300 square feet with three bedrooms, a full bath a one-car garage.

He found four properties with an average price of $168,875 in 2012 as compared to five similar properties in Warwick with an average price of $201,800 this September, an almost 20 percent increase in value over three years.

Properties are also selling faster. The four properties he used in the comparison spent an average of 44 days on the market in September 2012, as compared to 34 days on average for the five this September.

“Demand has increased, prices have increased along with it, and I can see assessed values following the same pattern,” he said.

He cautioned that increased assessed value is not a definite indication that property taxes will increase.

“The tax rate will be adjusted. Some areas will see a greater impact on their tax bills if sales in that particular neighborhood showed greater signs of increase than others,” he said.

While values are trending upward, waterfront homes in flood zones could experience just the opposite effect.

“The areas that are hurting are those with flood insurance,” DeGregorio said. With the phasing out of federally subsidized flood insurance, he said potential buyers are faced with annual premiums that frequently exceed $3,000.

“That will never go away [as long as there is a mortgage],” he said.

Property owners who pay off their mortgage can choose to self-insure, but as DeGregorio observes, “If you have a loss, you’re up the creek.”

Generally, waterfront and water-view homes in Warwick vary as much as 30 percent more in value than comparable homes inland. When the Federal Emergency Management Agency moved to eliminate flood insurance subsides according to the Biggert-Waters Act of 2012, homeowners saw their insurance premiums skyrocket, and living in a flood zone suddenly became a lot more expensive. Some premiums were expected to catapult from $2,500 to $20,000 a year.

In the spring of 2014, Congress stepped in, approving the Homeowner Flood Insurance Affordability Act that basically phased in the increase.

In addition to being an annual added cost to waterfront living, DeGregorio says there’s no knowing how high rates could go.

“It keeps creeping up, pricing buyers out of the market,” he said.

Lane has witnessed the same thing first hand. He owns a brick cape in Cranston that he rents. Although not a waterfront property, the house is near a stream and in a flood zone. His insurance spiked from $180 to $4,000.

He said the cost of flood insurance has been felt most by those looking to sell lower-priced waterfront homes. When added to the mortgage payment, insurance costs push monthly carrying costs beyond affordability. The result is that the seller is forced to lower the price and the value of the property declines.

Mayor Scott Avedisian called the Homeowner Flood Insurance Affordability Act a “quick fix.”

“It’s going to be worse in the future,” he said of flood insurance costs. “It’s going to price a lot of people out of waterfront properties.”

There’s no knowing at this time how that will impact the revaluation of Warwick homes within flood zones. In 2014, 1,800 Warwick homeowners carried flood insurance. It is not known how many have paid off their mortgage and self-insure.

City Tax Assessor Christopher Celeste said it is too early to make generalizations over property valuations. Site work is still being done with representatives of Tyler Technologies’ CLT Appraisal Division, which has been contracted to perform the residential revaluation gathering data. He said field personnel used Centerville Road as a starting line to move counter-clockwise across the city. They visit every property and are now working Warwick Neck. Homeowners have the right to deny access to those gathering data.

Celeste said CLT would need to see all the sales for 2015 before starting the process of assigning values. The value to be assigned is as of Dec. 31, 2015. Property owners will receive notification of values at the end of February for early March. They will have the opportunity of meeting with CLT should they question the value in informal hearings.

Final values will be set a month later, Celeste said. Property owners can still appeal to the board of assessment review and carry it a step further to Superior Court if still not satisfied.

While residential values would appear to be on the rebound, the same may not be true for commercial properties.

DeGregorio mentioned the number of small store vacancies in the city. “The big box stores and the Internet are putting people out of business,” he said.

The city contracted separately with Vision Government Solutions to conduct commercial appraisals. Most of the commercial appraisals are based on business income and expenses, as there are few comparative sales between business properties.

Comments

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  • JohnStark

    Waterfront properties in Warwick will sell, as they are in Narragansett, just not to RI buyers. There are numerous properties that are being sold for cash (no flood insurance needed) to out-of-state buyers as knock-downs. Buyers end up with a beautiful home for about one-fourth of what a similar waterfront structure would cost on, say, the Cape.

    Tuesday, October 6, 2015 Report this

  • patientman

    Great time to be a cash buyer of a waterfront home in rough shape. Fix it up and self insure. The flood insurance increases are going to really hurt people who live on or near the water but aren't wealthy. Either way, don't expect your taxes to go down. Those who have seen a rise will pay more because rates will rise and the higher home value. People who's houses depreciated will see their taxes go up because the rates going up. You didn't expect the city to cut its spending did you?

    Tuesday, October 6, 2015 Report this

  • RISchadenfreude

    The best way to afford waterfront property in RI was to move away, start a new career elsewhere and return to buy a house outright, renting it out when I don't want to be there (October through June, preferably). You can't do that if you LIVE in RI- The tenant's rent pays my taxes.

    Thursday, October 8, 2015 Report this