Housing market heats up
It’s heating up, which looks to be a good thing unless things get too hot.
We’re not talking about the weather, although, so far, we’ve only had a few days that could be classified as bone chilling. Temperatures are rising in the housing market, according to the most recent report from the Rhode Island Association of Realtors. The median price of a single-family home in Rhode Island rose for the 12th consecutive month in October to $235,000. This is the highest median price in the single-family home market since 2007.
In Warwick, Cranston and Johnston, the three communities with Beacon Communications newspapers, it’s a seller’s market. On average, homes in these communities sell within six months of being listed. Comparing October 2016 to October 2015, Warwick led the state in sales, with 123 single-family homes, a 41 percent increase. In Cranston, 77 single-family homes were sold in October, a decline of 7 percent, and in Johnston 34 homes sold, up one.
The report supports a recovery from 2008, when the housing bubble burst and homeowners suddenly found themselves underwater, where the market value was less than what was owed on the mortgage. Many walked away from their properties, leaving a glut of foreclosed and distressed sale homes on the market. Today, the distressed homes are starting to move, and realtors further say that higher market prices empower homeowners to move up to a larger home, or to cash out and downsize to something more manageable.
The active real estate market is also a marker of the overall economy, and a sign Rhode Island is finally leaving the Great Recession in the rear view mirror.
So this is all good, right?
From what Brenda Marchwicki, president of the Rhode Island Association of Realtors has to say we’re not so sure.
“There’s no question that Rhode Island’s housing market made significant strides this year. Sales have skyrocketed, but as a result the supply of homes to choose from has declined. Unless we start seeing more properties put up for sale, next year’s market may be more tempered. However, we might see more buyers entering the market due to the recent rise in interest rates, and if that happens, given the restrained inventory, a more significant spike in prices could occur,” she said in a statement released by the association.
Earlier this year when single-family home sales and the median price started to trend upward, several realtors expressed concern that the market was heating up too fast. This seemed contradictory: wouldn’t more sales and higher prices put more money in the pockets of realtors?
Their fear was based on the previous housing boom, when buyers entered the market with low, or no, down payments and some were in it to flip distressed properties, skimming off handsome profits as prices continued to inflate.
We know what happened. The market collapsed. Those who jumped in with the assumption values would continue to go up were left holding the bag. Those who had to sell lost money, while others, who may have otherwise moved up, sat tight and waited for home values to rebound. Some of the measures taken to tighten credit requirements were necessary, although perhaps the reaction was too extreme, keeping responsible people from entering the home market.
Are we on the climb to the top and facing another precipitous plunge? We think not. The strengthening housing market is welcome. Sellers may have the upper hand for now, but as long as we remember the lessons of the not-too-distant past, the market should find balance.