Fall is usually still a busy time for real estate sales, but this year, coming off a very busy spring and early summer, things are slowing down greatly.
Interest rates were at the lowest they have been in over 40 years back in June, but have risen up from under 5% on a 30 year fixed rate to back over 6.5% for most lenders. The inventory of available homes for sale which was at an all time low last spring, under 2,000 single family homes for sale, is now back up close to 3,000 homes for sale.
The largest stumbling point right now is that the vast majority of homes for sale are way overprice and out of line with what homes have been selling for.
In RI and nearby MA right now, the average asking price is over 30% higher than the average selling price over the past 6 months. So even though the average selling price has gone up over 20% during this year and also 20% last year, the average asking prices have jumped more than 50% over what they were a year ago.
This may have been ok when interest rates were droping and the same dollars would afford a higher mortgage, but now the opposite is happening. As interest rates rise, as the price of gas and utilities keeps going up and buyers wages do not go up, it's inevitible that the prices of housing has to come back down to affordable levels.
Buyers are having a tough time though finding the a home at a price they can afford.
Good homes priced under $250,000 are almost non existant. Higher end home sales have slowed a lot and it's not uncommon to see huge price drops from motivated sellers.
There are sellers who only put their homes up for sale because they thought they could cash in like they hit the lottery. Those days are and have to be over. Many not so serious sellers are just taking their properties off the market now.
Multi family homes also have increased in value, but again, the average asking prices shot up to over 50% above the average selling price. You used to be able to buy a 2 family and have the rents pay for the house. Then up till a year ago, you could get the 3 families to pay for themselves. Now I see 3 families that sold 2 years ago for $100,000 on the market for close to $300,000 and the rents can not come close to covering the cost to own.
Condos too have gone up and land is about as scarce as can be.
In my opinion, prices reached their peak months ago. Home prices are way out of reach of average Rhode Islanders personal income. If interest rates keep going up you will probably see homes decline in value.
There is what's known as the affordability index which has been dropping meaning that it takes a larger percentage of income to maintain the same life style.
Right now and probably through the winter should be a great time to make a purchase. Look for homes that have been on the market for at least a month or 2 and find out how serious the sellers want to sell.
Perhaps the average selling prices may stay at the levels they are, but certainly if sellers want to sell, they will have to price their properties realistically based on recent sales and not based on greed.
I feel the inventory will continue to increase as well.
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I look forward to hearing from you soon.
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Thank you...
Steve Gillikin
RE/MAX New Horizons
