Mortgage rates have decreased throughout the year, in sync with drops in the interest rate for 30-year treasury bonds. This has created a healthy environment for real estate sales, mortgage lenders, and appraisers, according to local industry members.
“Right now home sales are running at about 15 percent above what they were a year ago,” explained Jason Altman, an economist from the National Association of Realtors in Washington, D.C. “So we’re still experiencing a strong market, particularly as interest rates are dropping like a rock.”
He noted, however, that states in the Northeast tend to lag behind the national average for home sales, because people tend to move south from here. California, Florida, Texas, and even Seattle, Wash., are enjoying a majority of real estate sales, Altman said.
Last year happened to be a banner year in Rhode Island. Some 7,356 single-family units sold in the Ocean State in 1997, grossing $1.05 billion, according to the Rhode Island Association of Realtors (RIAR). It was the first time single-family home sales ever surpassed the 7,000 unit mark or the $1 billion point.
With low interest rates attracting more people to the market, local real estate and mortgage professionals hope that 1998 will also prove to be a record breaker. This optimism continues, despite a slight dip in home sales across the country in August. The NAR reported that single-family home sales declined 3.7 percent in August from the previous month. But that’s not all that ominous, considering national single-family home sales hit an all-time high of 4.91 million units in July, Altman said.
“It’s never gotten that high before. There is a chance that we could surpass that in the coming fall because of mortgage rates,” Altman added.
And August’s single-family home sales numbers were 10.5 percent higher when compared to sales from the same month last year, according to an NAR release. Figures were not immediately available to determine if Rhode Island also experienced the August single-family home sales dip. But Dana Phillips, president of RIAR and owner of Re/Max Post Road Realty in North Kingstown, said he wouldn’t be surprised either way.
“We don’t always mirror the national average. There could very well be a dip, but it’s off a record,” Phillips said.
Sustaining a record breaking pace is difficult, so “it makes sense” if there was a decline, he said.
This record pace began in January when interest rates began to drop; setting off events one local mortgage broker likens to Mark McGwire, the St. Louis Cardinals first baseman, breaking Roger Maris’ record of 61 home runs in one season by hitting 70 this summer.
“The government offers securities, bills, notes, and bonds,” explained Anthony Rondeau, manager of sales at Select Financial Mortgage Corp. in Warren. “Those bonds indirectly tell us what our interest rate
environment is going to be.
“The very last day of spring in 1998, the 30-year treasury yield was at 4.8 percent,” Rondeau said. “That’s phenomenal. That’s like McGwire hitting 80 home runs. It’s hard to describe.”
Mortgage interest rates are now at their lowest point since 1967, according to Rondeau. He partly attributes the growth of his family’s five-year-old mortgage company — which exceeded the amount of loans it wrote in 1997 by July this year — to interest rates and a growing staff.
Altman explained that with “volatility in the stock market” investors tend to “jump into the bond market.”
“The whole country is on a record pace,” said Phillips, of recent real estate transactions.
Even two states from the northeast, which traditionally lags behind the rest of the country in sales, were listed among the top 10 states with improved number of overall sales. Topping the list was Washington, D.C., which enjoyed a 49.3 percent increase in sales when second quarter figures from this year and last year were compared.
Connecticut improved its sales for single- and multi-family dwellings by 19.6 percent over last year, placing it 10th on the list, and Rhode Island ranked eighth with an improvement of 22.4 percent in sales, according to RIAR. In Rhode Island, more than 17,000 single-family units, condominiums and co-ops were sold during second quarter, RIAR officials indicated.
Though business is brisk, it appears that buyers and builders alike are still mindful of the real estate crash Rhode Island experienced in the late 1980s.
“They’re not overpaying for their houses the way they did in the 1980s,” Phillips said. “We had our market correction back in the early ’90s. Now we’re at a stable market. People ask if it’s a buyer’s or seller’s market; it’s neither, it’s a stable market.”
Said NAR economist Altman: “I don’t foresee the same thing happening. Last time you had a great deal of overbuilding in certain areas.
“There’s a very nice equilibrium between supply and demand right now, and prices are rising at a very good pace. We don’t have conditions for a real estate collapse,” he added.
In fact, a number of home owners are taking the opportunity to refinance their mortgages and secure a lower interest rate, according to Rondeau.
“People we already did three months ago are coming back,” he added, while new home buyers receive lower monthly payments or opt to buy bigger homes.
Even though home prices aren’t affected, the interest rate in some cases lets people save $100 a month, Rondeau said.
“It’s making it easier for people to get into the market, to save money, even to purchase a home that a year ago might have been a little out of reach.”
