Propelled by low mortgage rates, home sales are beginning to improve in Rhode Island almost five years after the real estate market collapsed. The growing sale of homes is being driven by a combination of lower home prices, low interest rates and housing affordability.
Housing prices have been falling since the market hit its peak more than four years ago. Distressed home sales, predominantly foreclosures are pressuring home prices in all price ranges, reducing home values in high-end neighborhoods as rapidly as in lower priced working class areas.
An expected increase in the inventory of distressed homes in the early part of 2012 should act to send values even lower in just about all of the state. The foreclosure crisis is hurting and there seems to be no end in site.
In Providence and East Providence sales are sluggish, despite low mortgage rates and an over-bloated inventory of bargain priced homes. Mortgage holders who have defaulted on their homes are remaining in their homes as long as they can before banks formally repossess them as foreclosures. The troubled market should see an increase in sales during the year on forecast housing deflation of 6.3%.
In the upper end market of Warwick there are fewer foreclosures than in many other regions of the state. But a hard hit economy and high unemployment are forcing many homeowners into foreclosure as the financial crisis delivers a painful blow to the region.
Record high levels of bank distress sales are sending home values lower throughout the area.
Warwick is forecast to sustain deflation of 6.2% in 2012.
In touristy Newport, sales of existing single family homes and vacation properties have been sluggish for more than three years. Since it’s harder for most people to get a mortgage, few candidates are qualifying to buy second homes, pressuring home values, which are forecast to decline an additional 6.4% by years end.
In Cranston home prices are falling at the fastest rate in memory, as high unemployment forces many homeowners unable to work out a deal with their bank on a mortgage modification out of their homes. Home sales have picked-up because of homes that have been discounted by bankers to sell quickly. The market is in for additional headwinds in 2012 on forecast 7.2% deflation.