Michael Schlott is the president of The Randall Family of Cos., which maintains 34 offices with more than 650 agents across Rhode Island, Massachusetts and Connecticut.
Schlott recently responded to questions posed by the Providence Business News on trends in Rhode Island’s real estate market and how agents have had to adapt to the “new normal.”
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PBN: Where are Rhode Island’s interest rates headed for the rest of 2020? Do you have any predictions for 2021?
SCHLOTT: At the beginning of the pandemic, the Federal Reserve lowered the federal funds rate in order to bolster the economy. Most recently, they voted unanimously to hold rates steady, offering no indication that they would raise rates in the near future. This is a clear indication that they appreciate the effect that low rates – and a strong real estate market – have on the overall economy.
With this in mind, the large majority of economic forecasts show interest rates remaining low through the end of the year and well into the beginning of 2021, with real estate playing a critical role in this country’s economic recovery.
PBN: Low interest rates typically mean a boost in home sales? Did your offices in Rhode Island experience that?
SCHLOTT: The Rhode Island housing market was off to a very strong start at the beginning of 2020 but slowed dramatically in March and April as a result of the pandemic. However, in mid-May, as interest rates were lowered and state economies began to reopen, the housing market took off.
The combination of low interest rates and pent-up demand, along with the attraction of resort markets, has led to Rhode Island real estate being extremely active. We fully expect that trend to continue in the months ahead.
PBN: Is Rhode Island heading toward another housing collapse?
SCHLOTT: No. The real estate economy is in a much better position than it was prior to the Great Recession. In 2006 through 2011, the market was reeling from several years of questionable lending practices, unsustainable price appreciation, rampant speculation and long-term unemployment issues.
We have none of those factors in place today. Lending standards are much tighter today, annual price appreciation is much lower, homeowners have significantly more equity and housing affordability – median household income versus median home price – is very healthy. Once unemployment returns to its pre-pandemic level, we will be in a great position for sustained growth in the housing market.
PBN: How has the luxury market performed throughout the pandemic? And what will the future of the luxury market look like moving forward?
SCHLOTT: Like other segments of the market, the luxury market stagnated at the beginning of the pandemic. However, once we reached late-May, the luxury market became very active and it currently shows no signs of slowing down.
As for the future, lifestyle is really the keyword when discussing luxury real estate, and interestingly, the pandemic seems to have reversed the trends of the last 10 to 15 years. Where buyers were once looking for more of an urban feel – proximity to town, less space, smaller yards – they are now looking for privacy and more space in order to work from home or to accommodate family.
Of course, proximity to the water is always very high on the wish list, along with gourmet kitchens, au-pair/guest suites, media rooms, wine cellars and outdoor kitchens. Additionally, where swimming pools were once considered more of a headache, they are now in demand as people look for safe and secure ways to enjoy the outdoors.
PBN: You’ve led the drive to increase the agency’s market share throughout the New England region, specifically on the waterfront. Are these destinations still where people want to buy during the pandemic?
SCHLOTT: Our coastal markets have always been attractive places to live and this has only been accentuated by the challenges of COVID-19. Buyers from major metro areas like Boston and New York have been looking to coastal New England for those things that we have in abundance – fresh air, space, privacy and natural beauty.
This reflects the trend that real estate is seeing around the globe where resort/rural market activity is far outpacing urban market activity. Moving forward, as people continue to reinvent their lives and reevaluate lifestyle, we expect the demand for coastal real estate to only increase.
Alexa Gagosz is a PBN staff writer. Contact her at Gagosz@PBN.com. You may also follow her on Twitter at @AlexaGagosz.
