Mixed Indicators: Where Rhode Island Residential Real Estate Market Is Heading
GoLocalProv Business Team
Mixed Indicators: Where Rhode Island Residential Real Estate Market Is Heading
Locally, every month has seen double-digit year-over-year increases in prices. Now, the median price of a single-family home in Rhode Island is $385,000.
Residential real estate prices have been on a rocket ship upward -- but there are some early indications that the market may be changing.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOne example of the growth is Residential Properties, which sold a record amount of real estate to date in 2021. The company has sold more than $1 billion dollars in just 10 months, breaking its own record of $1 billion in 12 months in 2020.
And, now there are some indicators that the real estate market may face some serious challenges -- one of the highest-profile signals is the reverberations at the high-profile digital real estate company Zillow.
Is This the Height of the Market?
The question plaguing many frustrated buyers and those looking to sell is, is this the height of the market?
“I think if you are thinking about maximizing your equity within this cycle -- and again, real estate cycles here tend to be about 10 to 12 years and we're absolutely at the top of that number -- if you're trying to maximize your equity in this cycle why risk it right? It may go up more," said Nelson Taylor of the Blackstone Team of Mott & Chace Sotheby's International.
"But it also may go down a lot more, and if this is your sort of the last hurrah, this is your last house, you're retiring, et cetera, I say don't take the risk," said Taylor who suggests considering selling now.
“We may see some sort of pullback in the next week, we could see it in four months, we could see it in 14 months who knows, but my personal belief is that we're going to see a little bit of a slowdown in inventory over the holidays in winter which is natural,” said Taylor.
“Typically that affects prices in pushing them up because of less inventory. I think we're going to have a gangbuster spring,” he says. “And then I think we're going to see a little bit of reverberation start in the market sometime summer or fall.”
Fortune reports, “The housing market is still moving upward, albeit at a slow pace. That slowing, or so-called normalization, is expected to continue into next year: Every 2022 forecast model Fortune has reviewed anticipates that price growth will slow down next year. The projected growth range among these forecasts is all over the place, however. Fannie Mae sees prices rising 7.9% in 2022. Zillow/Hotlink Research is more bullish, projecting 13.6% price growth in the next 12 months. And Ed Pinto, director of the American Enterprise Institute’s Housing Center, told Fortune’s Shawn Tully that prices could still rise in the high single-digits to low double-digits.”
Zillow Group's unexpected decision to scrap its home-flipping business has raised questions about the company.
The Wall Street Journal reports that the digital real-estate company, meanwhile, has "started trying to unload thousands of the homes it owns and has been talking to private equity and other investment firms to gauge interest. Pretium Partners, one of the largest owners of single-family homes for rent, is among those in advanced discussions with Zillow about buying homes, according to people familiar with the matter."
"Zillow’s largest remaining business revolves around its home-listings website and generating leads to real estate agents. This practice is high margin and brought in $207 million on an adjusted earnings basis before interest, taxes, depreciation and amortization last quarter. That was up from $195.5 million during the same quarter last year and more than double what it earned in the same quarter of 2019," according to the WSJ.
Fortune Reports, "That's the conclusion of a Bank of America research report that examined a selection of more than 300 properties that the real estate firm's Zillow Offers unit had purchased in a range of markets and currently has listed for sale on the site."
"For instance, in Austin, where the real estate market has been particularly hot during the pandemic, homes have appreciated by an average of 6% per year over the past five years, according to the widely used Case-Shiller real estate price index. But Bank of America found that on average the amount Zillow had paid for its Austin houses represented a 27% annual price increase since they were last sold, looking back over a four-year period," adds Fortune. "As the bank's analysts conclude, "This could suggest that Zillow may be purchasing speculative houses that could be at risk for price deflation in a downturn."
Mott & Chace's Taylor said Zillow did not do the volume of home flipping in New England as it did around the rest of the country.
Zillow is expected to lay off upwards of 25% of its workforce and its stock has fallen from a 52-week high of $212 per share to trading on Friday at $66 a share.