By JOHN HOWELL COVID-19 is blamed for a lot of ills, but like so many things in life, there's also a silver lining. Such is the housing market. For months, Realtors have moaned there's not enough inventory of homes to meet the demand. According to Leann
COVID-19 is blamed for a lot of ills, but like so many things in life, there’s also a silver lining. Such is the housing market.
For months, Realtors have moaned there’s not enough inventory of homes to meet the demand. According to Leann D’Ettore, president of the Rhode Island Real Estate Association, the state is faced with a 1.2-month supply of homes, the lowest it has been since 1988.
The result is that people – especially first-time homebuyers, D’Ettore said – are finding it extremely difficult to buy a home. While they may have great credit, they are being outbid by buyers with cash – and who, in some instances, are buying when having only seen a video of the property and without requiring inspections. Houses are being sold within hours of being placed on the market and frequently for more than the asking price.
How could this be? What’s created the frenzy?
Listening to D’Ettore, the pandemic has had a lot to do with it. In her words it has been a “perfect storm.”
She said as a result of last year’s shutdown, people were either laid off or worked from home. They discovered what was missing from their homes, realizing that either they wanted more space or that they had too much of it. They took on renovation and expansion projects and they thought of moving to something bigger or downsizing.
Rhode Islanders weren’t alone.
D’Ettore said many living in big cities or their suburbs realized they didn’t need to live close to their place of business. Rhode Island coastal communities not only offered opportunities, but home prices here were a bargain compared to what other places had to offer – homes within walking distance of the beach and on the beach selling for less than $1 million, she said.
Data provided by the RI Association of Realtors show that 23.4 percent of homebuyers were from out of state this March, as compared to 17.6 percent in March of 2020.
That’s only a chapter in the story.
As D’Ettore observes with the shutdown, manufacturers of home building supplies and mills cut back production. Workers were laid off; some plants were closed. Simultaneously, homeowners with time on their hands turned to home improvement projects. Lumber and building supplies became scarce. Contractors who won jobs prior to the pandemic found they were holding the short end of the stick. Rising prices were turning once profitable projects into losers.
It put the brakes on new home construction.
Moreover, says D’Ettore, with new home construction and renovations to older homes taking a hit, the inventory was further constricted.
Fueling buying like gasoline poured on a fire, interest rates were at record lows. People who hadn’t thought of buying a home did the math and found they could end up owning a house for as much as it was cost them to rent in some cases. The demand kept growing and the inventory kept dropping.
In its quarterly report, the Rhode Island Association of Realtors reported the sale of 2,170 single-family homes with the median price increasing from $290,000 to $330,000, or 13.79 percent. As an indicator of the shortage of single-family homes and their demand, the average days on market statewide dropped from 68 to 46 days this quarter.
In Warwick, 259 single-family homes with a median price of $289,900 sold in the quarter, reflecting a decline of 8 houses and a 19.35 percent increase in median price. Similarly, 199 single-family homes in Cranston – up 49 houses from the first quarter in 2020 – sold at a median price of $300,000, an increase of 17.67 percent. In Johnston, 87 homes, an increase of 21, sold at a median price of $310,000 for a 9.87 percent increase.
The hot housing market has also trained the spotlight on the shortage of affordable housing, which has become the focus of research into constraints on the development of housing and a package of legislation introduced by Speaker of the House K. Joseph Shekarchi.
The legislative package has the Rhode Island Realtors Association’s endorsement.
David Salvatore, RIRA government affairs director, finds the state’s multiple municipal zoning regulations as a hindrance to the development of affordable housing. The association supports house Bill 5632 and its provision allowing for “tiny homes.” Salvatore described tiny homes as being 150 to 400 square feet, which he reasons could be affordable to first-time buyers as well as vulnerable populations including veterans and as an option to assisted living for the elderly.
In written testimony to the House Committee on Housing and Municipal Government, Salvatore says, “the first step in exploring a ‘tiny homes’ option includes a discussion about public perception that small homes are not undesirable, low-quality housing. In fact, 66 percent of Rhode Islanders support changing zoning laws to allow the development of alternative housing options like carriage houses, garage apartments or tiny houses, according to our polling data.”
The association likewise supports Senate Bill 478, dubbed the First-Time Homebuyers Savings Account Act. The measure would enable prospective homebuyers to save for a down payment or closing costs through a tax incentive program. In testimony to the Committee on Senate Finance, Salvatore points out the share of first-time homebuyers in the national home sale market has fallen from 45 to 35 percent since 2009 according to the National Association of Realtors.
He writes the association recognizes the act “will not reduce all barriers to homeownership; however, first-time homebuyer saving accounts would be a financial tool for Rhode Islanders to move closer to their goal.”
The association furthermore supports the creation of a deputy secretary of commerce and housing.
“Without a point person who is empowered with coordinating and executing a critical facet of our economy, Rhode Islanders will continue their struggles to access housing opportunities, whether owned or rented,” Salvatore wrote in an April 13 letter to Rep. Marvin L. Abney, chair of the House Finance Committee.