Mixed indicators: where is Rhode Island’s residential real estate market heading

Saturday 06 November 2021

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The 2022 market could be more turbulent PHOTO: GoLocal

The future of the national residential real estate market and Rhode Island is increasingly uncertain.

Locally, each month has seen double-digit year-over-year price increases. Today, the median price of a single family home in Rhode Island is $ 385,000.

Residential property prices have skyrocketed, but there are some early indications that the market could change.

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An example of the growth is Residential Properties, which has sold a record amount of real estate to date in 2021. The company has sold over $ 1 billion in just 10 months, breaking its own record of $ 1 billion in 12 months in 2020.

And, now there are indicators that the real estate market may be facing some serious challenges – one of the most publicized signals is the reverberations from top digital real estate company Zillow.

Is it the height of the market?

The question that worries many frustrated buyers and those looking to sell is: does it live up to the market?

“I think if you’re looking to maximize your equity in this cycle – and again, real estate cycles here tend to be around 10 to 12 years and we’re absolutely at the top of that number – if you try to maximize your equity in this cycle why take the risk? It could increase further, “said Nelson Taylor of the Blackstone team at Mott & Chace Sotheby’s International.

“But it can also come down a lot more, and if it’s your kind of last hurray, it’s your last home, you retire, et cetera, I say don’t take the risk,” Taylor said who suggested considering to sell now.

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Interest rates may change in 2022 PHOTO: File

2022 Another year on the rise – or cooling?

“We might see some kind of pullback next week, we might see it in four months, we might see it in 14 months who knows, but my personal belief is that we’re going to see a little slowdown in inventory during the winter holidays, which is natural, ”Taylor said.

“Usually that affects prices by driving them up due to dwindling inventory. I think we’re going to have a gangbuster spring, ”he said. “And then I think we’re going to see a bit of reverberation start in the market over the summer or fall.”

Fortune reports: “The housing market is still rising, albeit at a slow pace. This slowdown, or what’s known as normalization, is expected to continue into the next year: every 2022 forecast model Fortune has looked at predicts price growth will slow down next year. However, the range of growth projected among these forecasts is pervasive. Fannie Mae sees prices rise 7.9% in 2022. Zillow / Hotlink Research is more bullish, projecting price growth of 13.6% over the next 12 months. And Ed Pinto, director of the American Enterprise Institute’s Housing Center, told Fortune’s Shawn Tully that prices could rise further from single-digit highs to double-digit lows.

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Zillow is laying off up to 25% of its workforce.

The elephant in the room – Digital real estate darling hits a major speed bump

The Zillow Group’s unexpected decision to end its home turnaround business has raised questions about the company.

The Wall Street Journal reports that the digital real estate company, meanwhile, has “started trying to offload thousands of homes it owns and has spoken to private equity firms and other investment firms to assess The interest. Pretium Partners, one of the largest owners of single-family rental homes, is part of advanced discussions with Zillow about buying homes, according to people familiar with the matter. “

“Zillow’s largest remaining business revolves around its real estate listing website and lead generation to real estate agents. This practice is high margin and grossed $ 207 million based on adjusted earnings before interest. , taxes, depreciation and amortization last quarter. That was up from $ 195.5 million in the same quarter last year and more than double what it earned in the same quarter of 2019 “, according to the WSJ.

Fortune Reports, “This is the conclusion of a Bank of America research report that examined a selection of more than 300 properties that the real estate company’s Zillow Offers unit had purchased in a range of markets and is currently listing. for sale on the site. “

“For example, in Austin, where the housing market has been particularly hot during the pandemic, homes have appreciated an average of 6% per year over the past five years, according to the widely used Case-Shiller House Price Index. But Bank of America found that, on average, the amount Zillow paid for its homes in Austin represented a 27% annual price increase since their last sale, over a four-year period, ”Fortune adds. The bank analysts conclude, “This could suggest that Zillow could buy speculative homes that could be at risk of price deflation if a downturn occurs.”

Taylor of Mott & Chace said Zillow didn’t do the house flipping volume in New England like it did in the rest of the country.

Zillow is expected to lay off more than 25% of its workforce and its shares have gone from a 52-week high of $ 212 per share to trading Friday at $ 66 per share.

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