As the COVID-19 pandemic took hold in Rhode Island in April 2020, John Hodnett worried about not only the health crisis but the effect it would have on the state’s luxury real estate market.
“I was just like, ‘Oh my God, this could turn everything upside down,’ ” said Hodnett, senior managing director and broker for Lila Delman Compass’ Narragansett office.
He wasn’t the only one feeling that way.
Paul Leys, co-owner and broker of Newport-based Gustave White Sotheby’s International Realty, saw activity on the local real estate scene drop to nothing in March and April in 2020 because of the pandemic shutdown. It looked bleak.
Then everything turned again.
In May 2020, seven-figure transactions started coming fast and furious, and it has only picked up pace over nearly two years. Now some local real estate professionals say there’s every indication that the high-end real estate market will stay red hot in 2022, if there’s enough inventory to satisfy the demand.
That’s a big “if.”
As of late February, there were 173 single-family homes and condos listed with asking prices at or above $1 million in Rhode Island. That’s down from 217 homes and condos listed in that category a year ago, when high-priced homes were already in short supply.
Typically, six months of inventory indicates a balanced market for supply and demand, but the average supply of homes on the market at all price ranges across the state is less than a month. In some areas, there is no inventory at all.
That dynamic continues to keep sales prices elevated.
Rhode Island posted record-high sales of luxury homes in 2020, which was followed by even higher sales figures in 2021. The state saw 698 homes sold for at least $1 million last year, 218 more than the record set in 2020.
Eight of the top 10 Rhode Island homes sold in 2021 were in excess of $10 million, including three that sold for more than $20 million. By comparison, the Bird House in Newport, purchased by Judy “Judge Judy” Sheindlin in 2018 for $9 million – Rhode Island’s top sale that year – would fall short of making the top 10 in 2021.
“We didn’t break the record once; we broke the state record three times with individual sales,” said David Huberman, sales associate for Gustave White. “It’s kind of astonishing to see that level of pricing.”
Some of the record-breaking activity occurred along one of the most storied streets in Rhode Island: Bellevue Avenue in Newport.
Clarendon Court, located just a few mansions down from the famed Marble House, sold in early September 2021 for $30 million, the highest price ever paid for a home in Rhode Island. The 7-acre seaside estate had once been home to the late Newport socialites Claus and Martha “Sunny” von Bulow, and the sale was nearly double the record-setting $17.75 million that singer Taylor Swift paid for Holiday House on Westerly’s Watch Hill in 2013.
Two other Bellevue Avenue estates also sold for top prices within weeks of each other in the fall of 2021 – the iconic 31,000-square-foot French neoclassical mansion called Miramar at $27 million and the 13,044-square-foot Ocean View next door at $16 million.
In fact, eight of the top 10 sales last year were in Newport, all of which were large homes with ocean views.
But don’t expect such a close grouping of eight-figure sales to happen again anytime soon.
Huberman says the properties on Bellevue Avenue being sold in the same year is an anomaly, mainly because of coincidence, and some, such as Clarendon Court, were not publicly marketed. He said it took more than a year to settle the Miramar estate after the seller died. Ocean View was in the family for three generations and the owners felt it was “the right timing for them to sell,” Huberman said.
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RECORD-BREAKING
The total number of homes sold in 2021 for $1 million or more in Rhode Island was 698, a 45.4% increase from 2020 and more than double the sales made in 2019. Eight of the top 10 home sales last year were in excess of $10 million. / SOURCE: RHODE ISLAND ASSOCIATION OF REALTORS[/caption]
OUT-OF-STATE INFLUENCE
What is keeping this frenzy over luxury homes going?
One big factor: bargain-hunting buyers from other states continue to flock to the Ocean State, according to Hodnett and Rhode Island Association of Realtors President Agueda Del Toro.
Indeed, the association says 48.4% of buyers of million-dollar homes in Rhode Island last year came from out of state, a slight drop from 51% in 2020. Seventeen percent were from Massachusetts.
And real estate agents don’t expect that trend to change much.
Annie Becker, associate broker for Lila Delman’s Newport office, said that despite a lack of supply and plenty of demand, Rhode Island’s coastline homes are still considered affordable high-end properties compared with areas such as Martha’s Vineyard in Massachusetts, the Hamptons in New York, and Los Angeles.
“Someone just listed a $300 million house in Los Angeles,” Becker said. “One-hundred-million-dollar-plus [home listings] in Los Angeles are not that unusual.”
By comparison, a 3,300-square-foot, shingle-style beachfront home located three houses down from Swift’s Watch Hill mansion sold for $10 million in February 2021. The house, purchased by a Greenwich, Conn., business executive, was Rhode Island’s ninth-highest sale of the year.
COVID-19 also continues to influence high-end sales.
Hodnett says buyers have told him that they find it more difficult to live in urban areas such as Boston and New York City nowadays, whether it’s because of health concerns or activities in more-densely populated areas being limited because of the pandemic. People still want something with more elbow room inside and out, Hodnett says.
Huberman concurs. “People don’t need to be present in the office, so it makes more sense to be in Newport and have a nice place to live and not staying in their penthouse in Boston or New York,” he said.
FUTURE FORCES
By some measures, 2021 was a record-breaker for Rhode Island residential real estate at every price level. The State-Wide Multiple Listing Service recorded $7.9 billion in residential sales last year, up 22% from 2020. At the same time, however, the number of transactions numbered 11,500 in 2021, down 1.3% from the year before.
Is that an early sign of a cooldown? It’s unclear.
In recent years, declining mortgage interest rates have motivated potential homebuyers to jump into the market. The national average on 30-year-fixed home loans hit bottom at 2.68% in December 2020 and bumped along at between 2.74% and 3.1% in 2021. When the average rate climbed to 3.45% in January, it seemed like a sure sign that transactions would slow further.
But January sales data not only showed that the median sale price for a single-family rose 10.8% from a year earlier to $370,000, but the number of sales for the month had jumped 5.4% year over year. Apparently, forecasts of higher interest rates in 2022 have put pressure on those still looking to put in winning bids and lock in rates before they get too high, according to people in the local real estate industry.
The luxury market is a different story.
Leys and Hodnett say they don’t see rising interest rates having much of an effect on transactions involving multimillion-dollar properties, noting that many sales are all-cash deals.
“As long as the inventory remains as low as it is and buyer demand is out there, I don’t see something like an uptick in interest rates affecting the market,” Leys said.
But other forces will have an effect – namely the performance of the financial markets, where the wealthy have money parked, and a potential increase in the capital-gains tax in Washington, D.C., according to Hodnett. The threat of such an increase could persuade some high-end property owners to sell now to avoid the possibility of higher taxes if they sell later.
While a capital-gains tax increase proposed by President Joe Biden last year never materialized, Hodnett says some homeowners are still concerned it could be on the table this year.
The biggest factor influencing the luxury market remains inventory. Leys says there is not enough high-end homes on the market to sustain the high level of sales that have taken place in recent years. He says agents such as himself and Huberman are getting “creative” in finding sellers, even making calls to previous clients who might be contemplating putting their homes up for sale but haven’t done so yet.
No matter what happens, Hodnett doesn’t expect Newport to dominate the top of the sales list again in 2022.
“In 2020, Jamestown was smoldering and there were tons of high-end sales in Jamestown,” he said. “The cycle is going to swing back where you’re going to see more Jamestown inventory and buyers hitting Jamestown. Same thing with Watch Hill [in Westerly]. 2021 was the year of Newport.”
TOP TEN SALES
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1. Clarendon Court | 626 Bellevue Ave. | Newport
Price: $30,000,000 | Date Sold: Sept. 1, 2021 | Buyer: 626 Bellevue Holdings LLC | Seller: Clarendon Court Trust | Broker: Gustave White Sotheby’s International Realty (buyer and seller)
Year Built: 1903 | Bathrooms: 8 full, 1 half | Bedrooms: 9 | Living Space: 11,579 square feet | Previous Price: Sold for $13,126,000 in 2012 / COURTESY MIKE OSEAN[/caption]
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2. Miramar | 646 Bellevue Ave. | Newport
Price: $27,000,000 | Date Sold: Sept. 24, 2021 | Buyer: Miramar 646 LLC | Seller: 646 Bellevue LLC | Broker: Gustave White Sotheby’s International Realty (seller) | Year Built: 1915 | Bathrooms: 12 full, 3 half | Bedrooms: 23 | Living Space: 30,982 square feet | Previous Price: Sold for $17,150,000 in 2006 / COURTESY MIKE OSEAN[/caption]
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3. Beacon Rock | 147 Harrison Ave. | Newport
Price: $23,000,000 | Date Sold: Dec. 8, 2021 | Buyer: Beacon Rock LLC | Seller: Brian R. Cunha | Broker: Gustave White Sotheby’s International Realty (buyer and seller) | Year Built: 1888 | Bathrooms: 10 full, 1 half | Bedrooms: 6 | Living Space: 11,675 square feet | Previous Price: Assessed at $9,645,100 in 2021 / COURTESY MIKE OSEAN[/caption]
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4 (tie). Ocean View | 662 Bellevue Ave. | Newport
Price: $16,000,000 | Date Sold: Nov. 29, 2021 | Buyer: 662 Bellevue Holdings LLC | Seller: Ocean View LLC | Broker: Gustave White Sotheby’s International Realty (buyer and seller) | Year Built: 1985 | Bathrooms: 9 full | Bedrooms: 9 | Living Space: 13,044 square feet | Previous Price: Assessed at $9,031,100 in 2021 / COURTESY MIKE OSEAN[/caption]
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4 (tie). Seaward | 339 Ocean Ave. | Newport
Price: $16,000,000 | Date Sold: Sept. 3, 2021 | Buyer: Avalon Acquisition LLC | Sellers: Atlantic Properties Revocable Trust and Trustee Seth A. Gelber | Broker: Lila Delman Compass (buyer and seller) | Year Built: 2007 | Bathrooms: 4 full, 2 half | Bedrooms: 4 | Living Space: 4,852 square feet | Previous Price: Sold for $8,732,000 in 2004;the 2021 sale is for nearly half the property / COURTESY LILA DELMAN COMPASS[/caption]
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6. La Sanctuaire | 11 Ridge Road | Newport
Price: 13,970,000 | Date Sold: Dec. 14, 2021 | Buyers: T. Roseanne Williams and Dennis Williams | Sellers: Frank Sciuto and Marcus Real Estate Holdings LLC | BrokerS: Gustave White Sotheby’s International Real Estate (buyer); Lila Delman Compass (seller) | Year Built: 1980 | Bathrooms: 5 full, 1 half | Bedrooms: 5 | Living Space: 5,994 square feet | Previous Price: Assessed at $6,701,900 in 2021 / COURTESY LILA DELMAN COMPASS[/caption]
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7. Normandie | 232 Ocean Ave. | Newport
Price: $12,500,000 | Date Sold: Oct. 15, 2021 | Buyers: Igor and Lily Sokol | Seller: Normandie Irrevocable Trust | Broker: Gustave White Sotheby’s International Realty (seller) | Year Built: 1914 | Bathrooms: 7 full | Bedrooms: 7 | Living Space: 8,578 square feet | Previous Price: Assessed at $7,137,500 in 2021 / COURTESY MIKE OSEAN[/caption]
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8. 518 Ocean Road | Narragansett
Price: $12,000,000 | Date Sold: May 26, 2021 | Buyer: HTE Irrevocable Trust | Sellers: David R. Reiser, trustee of David R. Reiser Trust – 1995, and Andrea R. Reiser, trustee of Andrea R. Reiser Trust – 1995 | Broker: Mott & Chace Sotheby’s International Realty (buyer and seller) | Year Built: 2014 | Bathrooms: 6 full, 2 half | Bedrooms: 5 | Living Space: 8,525 square feet | Previous Price: Sold for $3,625,000 in 2014 / COURTESY MOTT & CHACE SOTHEBY’S INTERNATIONAL REALTY[/caption]
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9. 8 Bluff Ave. | Westerly
Price: $10,000,000 | Date Sold: Feb. 17, 2021 | Buyer: Eight Bluff Avenue LLC | Seller: Eight Bluff Holdings LLC | Broker: Olga B. Goff Real Estate (buyer and seller) | Year Built: 1983 | Bathrooms: 6 full, 1 half | Bedrooms: 5 | Living Space: 3,373 square feet | Previous Price: Assessed at $7,750,700 in 2019 / COURTESY OLGA B. GOFF REAL ESTATE[/caption]
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10. Honeysuckle Lodge | 225 Ruggles Ave. | Newport
Price: $9,391,635 | Date Sold: July 23, 2021 | Buyer: 225 Ruggles LLC | Seller: Honeysuckle Lodge LLC | Brokers: Lila Delman Compass (buyer); Gustave White Sotheby’s International Realty (seller) | Year Built: 1890 | Bathrooms: 8 full, 8 half | Bedrooms: 9 | Living Space: 10,773 square feet | Previous Price: Assessed at $6,841,200 in 2021 / COURTESY MIKE OSEAN[/caption]
James Bessette is special projects editor at PBN. Contact him at Bessette@PBN.com.