Rhode Island is the eighth most expensive state for homeowners based on monthly mortgage payments, according to figures recently released by the U.S. Census Bureau.
While the state fared better than neighbors Massachusetts and Connecticut – which placed third and fifth, respectively – Rhode Island is moving up the ranks.
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The median monthly payment of $1,585 for owner-occupied units is up 7.8 percent from 2005, when the median cost was $1,469 and the state ranked ninth. In fact, Rhode Island has been moving steadily up the list since 2002, the first year the study was conducted, when the median monthly payment was $1,305 and the state ranked 13th nationally.
Chris Barnett, a spokesman for Rhode Island Housing, said the figures can be attributed largely to the state’s lack of new housing supply.
Although the Rhode Island population has remained relatively static in recent years, the number of households has increased by nearly 30,000 since the 1970s, he said. In 1970, the average household had more than three residents. By 2000, that figure had dropped to 2.47.
“Every new household needs a place to live, and we are just not creating housing at an adequate pace,” Barnett said.
Recent figures don’t show much promise for new home construction, however. In 2005, Rhode Island ranked dead last in the nation for the creation of new housing units per capita, with 1,505 new units created, a 0.3-percent increase from 2004.
Statistics released last week by the Rhode Island Builders Association show that in the first three quarters of 2006, the pace of construction was the slowest in at least the last 15 years.
Through September, it said, Rhode Island issued just 1,158 permits for single-family units, compared with more than 1,300 last year. In 2004, that figure was 1,500 permits through September.
The third quarter was a slow one, with permits off more than 100 from the third quarter of 2005.
Yet the executive director of the builders’ association, Roger Warren, this month said he anticipates a turnaround in the housing market come 2007, based on the predictions of former Federal Reserve Chairman Alan Greenspan.
And Rhode Island Housing’s Barnett said he is pleased with the approval of the $50 million bond for affordable housing by voters this month. The agency, which was part of a coalition that supported the bond, is expecting the money to create at least 1,000 affordable homes over the next four years, he said.
Barnett added that the state’s affordable housing law – which requires that every Rhode Island community where less than 10 percent of the housing stock is judged affordable to low- and moderate-income residents must develop a plan to meet that quota – should have a huge impact, beyond the money that’s being invested.
“Because of our small size, we cannot solve it the way that other states do, through sprawl,” Barnett said. “The key to solving our housing shortage is to redevelop the mill villages and the village centers and the commercial space that exists in virtually every Rhode Island community.”
He observed, however, that it is difficult to tell when those policies and plans might have a substantial impact on the market.
“Housing prices have increased six times faster than income since 2000,” Barnett said. “That has left people who only a few years ago could’ve easily purchased a home on the outside looking in.”
Both locally and nationally, Realtors this year have reported difficulties in the market – and that, in turn, should help drive prices to a more affordable point for consumers, experts say.
The Rhode Island Association of Realtors reported a drop-off in sales of 26.77 percent through the first nine months of 2006, compared with the same period last year, and said the number of available homes on the market peaked at 6,545 during the third quarter of this year. Last week, however, it said that the number of available homes is dropping again.
During the first week of November, the association said, there were 6,115 homes on the market. A PBN search of single-family houses on the Multiple Listing Service at the same time last year found 5,273 were available.
“Rhode Island is experiencing a projected correction of the housing market, leading to a healthier, more sustainable market,” said Cecile Cohen, the association’s president. “Our recent drop in inventory, however, signifies an upcoming change in direction.”
