With Rhode Island home prices increasing more than any other state during 2001, homeowners may be enjoying their investment, but buyers are facing a market of low supply and high prices.
The study by the Office of Federal Housing Enterprise Oversight confirmed what many suspected for quite some time: The housing market has gotten too expensive for younger first time homebuyers.
A recent survey conducted by Providence Business News showed that 56 percent of those polled felt the Rhode Island housing market was pricing its young professionals out of the state.
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Chris Barnett, a spokesperson for Rhode Island Housing and Mortgage Financing Company, said the average age of borrowers is 34.
"That’s not surprising when you consider that we help lower-income homebuyers," he said. "They have to work hard for years to see their incomes rise to the point where homeownership is possible even with the low interest rates and downpayment assistance we offer."
Barbara Sokoloff, whose Providence-based Sokoloff Associates, prepares feasibility studies and develops affordable housing, said her company has done an affordable housing survey for the town of South Kingstown. The town commissioned the study because the sons and daughters of South Kingstown residents can’t afford to live there once they’ve grown up. The median sale price of a house in South Kingstown rose 22 percent to $200,000 from 2000 to 2001.
"I can certainly say that it’s not just South Kingstown where this is happening," she said. "We’re seeing it all over the place that the cost of construction, rehabilitation or even just existing housing for sale is so high."
In another Providence Business News poll published last month, 83 percent of respondents said they would be more likely to purchase an existing property than purchase land and build a house.
Cynthia Reed bought a house in Providence in 1996 when she was 28.
"If I bought this place now, forget about it," she said. "I wouldn’t be able to afford it. We bought it for $98,000.
"I think I could probably sell it for at least $200,000."
The Providence Business News poll also found that 61 percent of those surveyed have seen the value of their home increase more than $80,000 in the last five years. However, only 17 percent of respondents even considered putting their homes on the market as a result of the soaring real estate prices.
"It’s fair to project that it will take people longer to amass the income and assets necessary to buy homes in this rapidly appreciating market," said Barnett. "A few years ago the median price of a single family home was $115,000, and now it’s nearly $165,000. Not only will people have to wait longer to become homeowners than their parents did, but housing is likely to take a bigger percentage of their paycheck."
Sokoloff said housing is defined as affordable if you do not pay more than 30 percent of your monthly gross household income for rent and utilities.
