Housing: market shift to sellers?

SUPPLY AND DEMAND: Robert Martin of Century 21 CrossRoads shows off a Cumberland house. He says demand has increased, but bidding wars are uncommon. / PBN PHOTO/BRIAN MCDONALD
SUPPLY AND DEMAND: Robert Martin of Century 21 CrossRoads shows off a Cumberland house. He says demand has increased, but bidding wars are uncommon. / PBN PHOTO/BRIAN MCDONALD

House hunters diving into the spring real estate market may encounter something unseen since the giddy days of the subprime bubble: a bidding war.
Fueled by pent-up demand and a suddenly tight supply of houses, what has been an unqualified buyer’s market for the past four years is tilting, at least in some circumstances, back toward the seller.
And it’s not just in Boston and New York.
Even Rhode Island and southeastern Massachusetts real estate agents are touting a surge in multiple-offer scenarios despite inhospitable weather for the first three months of 2013.
“I have lost out on three multiple-bid situations with my clients and am now working with them knocking on doors to see if people want to sell their houses, because we can’t find anything on the market,” said Arthur Chapman, broker with William Raveis Rhode Island in Newport. “I did an open house that was on the market in the low $300,000s and we had 25 parties through the door. I haven’t seen that number of people at an open house in years.”
Considering how far the real estate market fell after the crash, and then double dipped in 2010, any hint of a turnaround is welcome relief for homeowners trapped under large mortgages.
Across the country, home prices have climbed steeply in recent months – the Case-Schiller 20-city composite index rose 8.9 percent in January – pulling many who owed more than their houses were worth above water, while raising concerns about a new real estate bubble.
Of course, Rhode Island and the Providence metropolitan area have been one of the last places to feel the rebound – the state ended 16 months of year-over-year price declines in October (as measured by Multiple Listing Service) and Providence-Fall River-New Bedford median prices in January only increased 0.6 percent, according to Corelogic.
But there’s a growing consensus that even this market is headed in the right direction.
The Rhode Island Association of Realtors last month reported Ocean State single-family sales rose year over year for the 20th consecutive month in February and the median price climbed 11 percent. (February 2012 had the lowest Rhode Island median single-family sale price, $170,000, since the recession.)
What’s puzzling about the local recovery is that the increase in demand hasn’t prompted more homeowners to test the waters and put their homes on the market. In February, the 4,301 houses listed for sale in Rhode Island represented an 18 percent decline from the same period last year and 17 percent decline from the same period in 2011.
“The inventory thing we are seeing everywhere, even more in the West than the Northeast,” said Patrick Newport, an economist who tracks real estate with IHS Global Insight in Lexington, Mass. “Part of it is seasonal, but in most of New England there hasn’t been a need to build in so long, because the population isn’t going up, that now there just isn’t that much out there.”
Setting aside the lack of new construction in New England, which preceded the recession and has its own drivers, Newport said the top reason more homes are not hitting the market is that so many remain too far underwater for recent price gains to mean much.
“If you are still deep underwater you can’t sell; but even if you are a little bit underwater, because things seem to be picking up, you may wait it out a season or two to have a little equity built up,” Newport said. “Interest rates are so low that you make nothing having money in the bank, but if you wait it out a few years, maybe you will make 5 percent on appreciation.”
Despite the recent market upswing, homeowners in the Providence area who bought too much house at the wrong time are still a long way from getting their head above water.
According to figures from CoreLogic that defy most market trends, the number of upside-down homes in the Providence area actually rose from 73,375 in the third quarter of last year to 76,655 in the fourth quarter, with 22 percent of all mortgages in negative equity.
As recently as two years ago, foreclosures and short sales kept a steady stream of properties on the market even when most homeowners weren’t considering listing their houses.
But those properties, many requiring major renovations, have been bought in large numbers for low prices by investors and the flow of distressed sales has ebbed in the past year. A few have deteriorated so much they’ve been condemned, reducing the total housing stock further.
For those interested in selling so they can reinvest in a property with more upside, the lack of houses available can be a self-reinforcing deterrent to testing the market. “In some areas of the state, such as Barrington and the East Side of Providence, people are not putting houses on the market because they are afraid they will sell too fast,” said Sally Lapides, president of Residential Properties in Providence. “They are worried they will end up with no place to go.”
Looking to the traditional spring buying season, Lapides expects a typical increase in homes listed due to the warm weather, but the improving market shouldn’t cause a dramatic rise in “for sale” signs on Rhode Island streets.
“You will see more inventory in the spring, but not a glut, just a normal spring inventory,” Lapides said. “And I think we are going to have a steady growth in the market, but I don’t think a huge appreciation. I don’t see prices going up 10 percent here.”
In northern Rhode Island, Robert Martin, of Century 21 Crossroads in Woonsocket, said demand has increased, but the kind of bidding wars experienced in more rarified parts of the region are uncommon.
“I see inventory tightening, but it is not that there are no houses available,” Martin said, attributing at least some of the low inventory to the comparatively harsh 2013 winter. “I find in northern Rhode Island the market that is tightening the most is homes from $150,000 to $260,000, those are being gobbled up and sell much faster if they are priced correctly.”
Back in the hotter market of Newport, Chapman at William Raveis said even though job growth and population in Rhode Island have been stagnant, the absence of new homes entering the market combined with increasing populations and prices elsewhere point to appreciation.
“We are starting to get referrals from buyers in Boston who are looking at commuting from the East Side of Providence because the markets in Boston and Wellesley are just so tight,” Chapman said.
The second-home market in Newport is strong and speculative construction is even returning to some pieces of land on Aquidneck Island, he added.
“I think nationally you are going to see 8 percent to 9 percent appreciation, and you’ll see that in some Rhode Island communities,” Chapman said, “statewide maybe 5 percent. Providence County is an 800-pound gorilla because it has so many homes and was one of the last areas to rebound.” •

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