Sluggish home sales and high market volatility leaves Rhode Island’s housing markets in trouble even as the federal government’s Hardest Hit program injects $80-million in cash into the ailing economy. High joblessness and incredibly low home sales volume are hurting the economy, but some under-employed and unemployed workers will get help from the federal government to keep the roof over families’ heads.
In the months following the buyers’ federal tax credit expiration home sales cooled throughout Rhode Island, but home values rose in a strange twist of fate that will only turn out to be temporary if the government doesn’t inject more capital into the Rhode Island housing aid. The economy is so wrecked in Rhode Island’s housing market that the sugar-high it experienced following the tax credit showed only an artificial high in home price figures. Unemployment stands at one of the highest levels in the country and things don’t seem to be getting any better in terms of job growth.
The number of homes sold fell by a third after the federal credit expired. The break buyers got wasn’t enough with other federal programs to push the market into positive territory in Providence, riddled by the real estate crash with vacant foreclosed homes scattered on nearly every block. Near record low mortgage rates and bargain priced foreclosures weren’t enough to get enough buyers back into the market.
Tight mortgage under-writing criteria is hurting sales as the market in Providence stalls. Sales are projected to increase by summer with forecast deflation for the year of 9.2%. In neighboring East Providence the market will sustain a similar decline, predicted to be 9.5% in 2011.
Home sales in Warwick, the state’s second largest city also plummeted following the tax credit expiration, but a surplus inventory of homes and other properties that are part of the shadow inventory will provide a larger supply of discounted properties towards the middle of the year. Workers looking for jobs in Rhode Island are having a hard time
finding work as bankers’ slow foreclosures in order to manipulate home prices higher. Lay-offs are hurting Warwick, which is forecast to sustain average housing depreciation of 8.3% for the year.
In Cranston the market got a shot in the arm from the federal credit, but home sales turned anemic in the following days as the sugar-high unwounded and banks and mortgage companies became more concerned with increasing default rates in the area. Home sales fell by half in the intervening months as more and more Rhode Islanders’ grew weary over the troubled economy and held off making decisions on property. Average home prices are forecast to decline 7.6% in Cranston for the year.
In the high-end tourist capital of Newport, where sailing regattas claimed fame New Englanders talk about the housing market with concern over the economy as the foreclosure crisis rages on in the state. But another extreme is also abundantly clear in Newport. Estate homes that are listed on the market in the millions of dollars are selling at a fairly healthy pace, netting multi-million dollar prices. A record $6.4-million estate closed in late 2010 purchased by a financial industry executive. But most of Newport’s housing stock isn’t composed of the super-rich. Home prices are forecast to decline an average of 8.3% in 2011.