Skyrocketing Rhode Island home prices have pushed up the purchase price limits
for Rhode Island Housing and Mortgage Finance Corporation’s low interest loans
57 percent for single-family homes, redefining “affordable housing” and opening
up the market for more low- and moderate-income buyers.
For the first time ever, the purchase price limits for the loans have exceeded $300,000 for first-time home buyers. The limits are now $330,000 for single-family homes and condos, $360,000 for two-family homes and $500,000 for three- and four-family properties.
“Our purchase prices were unrealistically low,” said Chris Barnett, spokesman for Rhode Island Housing. “So people who needed to take advantage of our below-market financing were shut out of many communities. There simply wasn’t anything for sale under our old limit.”
The price limits prior to the change were $210,000 for a single-family home, $235,000 for a two-family home and $280,000 for three- and four-family properties.
The limits were effective March 17. And the industry is already seeing the effects.
“I’ve seen people in the past have to hold their bid at $210,000 and they couldn’t go any higher,” said Tom Piantadosi, of RE/MAX Town & Country in Cumberland. “I had a recent client who didn’t know about the increase – he was shocked. He was going to have to hold out at $210,000 but was excited that he could now bid at $260,000.”
Purchase price limits for homes in Connecticut, in comparison, vary by town, and range from $152,100 to $577,500 for existing housing, according to the Connecticut Housing Finance Authority. The purchase price limits in Massachusetts, according to the Massachusetts Housing Finance Authority, range from $342,300 for a single-family home to $542,500 for a four-family home. In nearby Fall River, the limit is $196,200 for single-family homes.
“The increase in our purchase price limits opens many communities to our borrowers for the first time in several years,” Barnett said. “They may be moderate-income, but they still need help. Our low interest rates bridge the gap between what they earn and what homes cost.”
The new limits reflect the corresponding price range increases in the market – the median sales price for a single-family home jumped more than 22 percent last year to $230,000, according to the Rhode Island Association of Realtors.
“With prices being so high, this is just going to make homes more accessible to folks, and Rhode Island Housing makes sure (buyers) don’t borrow more than they can afford,” said Ara Berberian, director of training and professional development of the Consumer Credit Counseling Service of Southern New England.
As a result of the increase, the number of single-family listings that would qualify for Rhode Island Housing loans almost doubled, according to the Realtors association, Barnett said.
“Now that they’ve increased the buying power, it’s allowing people to buy homes in places they wouldn’t have been able to afford before,” said Anne Leddy-Smith, an agent at RE/MAX Central in Coventry.
Rhode Island Housing was able to offer these new limits because federal guidelines governing the loan program were updated for the first time since 1994.
“Real estate prices are on the move,” Barnett said. “We adjusted our price limits to keep pace with the market. Now a lot more homes are within reach of our borrowers.”
Rhode Island Housing also increased the income limits for qualification under the low-interest loan program. First-time buyers are now eligible if their income does not exceed $67,900 for a one- or two-person household, or $78,000 for a household of three or more, Barnett said. The group also offers down payment and closing cost assistance to households making up to $38,000.
Income limits in Massachusetts range from $73,700 to $90,800 for a one- or two-person household to $84,700 to $103,200 for a household of three or more. Statewide salary limits in Connecticut for these programs range from $75,400 for a household of one or two to $86,710 for a household of three or more.
“Even if you earn $70,000 a year, you can’t afford to buy a home in many communities without our help,” Barnett said. “The lower the interest rate, the more you can afford to borrow. And that’s crucial when the average single-family house is $280,000.”
Rhode Island Housing also lowered interest rates, which range from 4.20 percent to 4.95 percent, depending on household income.
“Even if you could find something under the old limits, it probably wasn’t your dream home,” Barnett said. “Now first-time home buyers can have their cake and eat it too.”
Leddy-Smith said that with an increasing homeless population and trying to attract big business, available affordable housing is even more important.
If the increase expands housing opportunities for the middle class, and in so doing, makes more housing available to the working poor, it’s a step in the right direction, said Scott Wolf, executive director of Grow Smart Rhode Island. But the increase alone doesn’t solve the underlying crisis, he added.
“It’s not addressing the whole problem, by any means,” Wolf said. “It’s a huge reality check on how expensive housing has become in Rhode Island, and if it magnifies the affordability issue maybe that will be positive. It shows that things are really on the verge of being out of control.”
