High consumer confidence, low unemployment, and mortgage rates that
dipped under 7 percent conspired to make 1998 a record year for single-
family homes sales, both locally and nationally.
But the incredible growth, while not expected to evaporate completely,
will almost certainly slow in 1999, experts predict.
The 1998 boom was evident all over Rhode Island – from single-family
homes to condominiums to office space and vacation homes. But single-
family home sales were the big story. For example, existing sales
through September hit 6,258, compared to 5,199 at the same time last
year, according to the Rhode Island Association of Realtors. Third-
quarter gross sales volume soared to $934,690,878. By comparison, the
total gross sales volume for 1995 was $849,499,575.
So strong was the single-family housing market, in fact, that bidding
wars among competing buyers erupted occasionally, some Realtors said.
Several factors fueled the spending spree, experts said. With the
economy growing steadily, consumer confidence ran high. Thirty-year
mortgage rates plummeted under 7 percent – it’s 6.7 percent now – and
the stock market, despite its mid-summer nose dive, produced big
returns. Combine that with unemployment that hovered around 4 percent,
they said, and you have the formula for a record year.
Nationwide, 4.8 million existing single-family homes were sold, a
record, eclipsing the 4.2 million sold in 1997.
But expect that to end in 1999, according to the National Association of
Realtors.
While mortgage rates will remain low – the national association predicts
they will dip to 6.5 percent – the U.S. trade deficit with the rest of
the world will hurt the economy. Meanwhile, more layoffs, combined with
a gradual realization by consumers that they’ve been spending too much,
will slow economic growth, reduce spending, and erode overall consumer
confidence, predicted Oralwin Velz, managing director of research for
the association, whose headquarters is in Washington, D.C.
Existing single-family sales this year are expected to slip to 4.5
million, she said.
One of the consequences of the surging sales has been a drop in
inventory, said Jay Readyhough, president of the Rhode Island
Association of Realtors. This is also a national problem, said Velz,
adding that builders are having difficulty building enough homes to
supply the current demand.
But the building and real estate boom has also had other effects. Towns,
struggling to cope with the strain on services caused by growth, are now
employing numerous tactics to control growth. For example, anyone
pulling a building permit for a single-family house in South Kingstown
is hit with a one-time $2,065 fee for the school system and a $1,475 fee
for the town’s open-space fund. The school fee goes into a capital fund
that the town uses to build schools.
Though none of the money goes into the town’s operating budget, builders
nonetheless charge that the fees are unfair because they target
newcomers only.
Nineteen ninety-eight was also the year in which the town of East
Greenwich took its challenge of a 1992 state law requiring town planning
boards to approve subdivisions to the state Supreme Court. The town,
acting under its 1972 home-rule charter, gives this power to its town
council – the only community in the state that still does so. If the
court decides to hear the case an ruling could come as early as this
winter. Otherwise, the town will be forced to obey the 1992 law.
Commercial real estate also shared in the prosperity. The Providence
commercial vacancy rate for “Class A” buildings slipped to 7.93 percent,
down from 10.5 percent in 1997. This is expected to remain the same for
the first six months of 1999, said Karl F. Sherry Jr., of the commercial
real estate firm of Hayes & Sherry, because demand has hit a lull. He
added, however, that a commitment by a major tenant could spur the
growth of a new office building in the city.
Rents, now ranging from $20 to $30 per square foot for Class A buildings
in Providence, are also likely to remain steady, Sherry said.
“I think we have finally caught up with the supply on the market,” he
said. “There isn’t a lot of product out there now.”
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
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