Home Prices and Mortgage Rates Turn Back the Clock for Rhode Island Buyers

By Richard Barrington
Local Lender Columnist
Apr 28, 2008
At $225,000, no-one would call Rhode Island's median home price cheap. Even so, that price is a significant discount from recent levels, giving many Rhode Island residents a better opportunity to buy a home. Further sweetening the deal are mortgage rates, which despite a recent up-tick remain at relatively low levels.

Rhode Island Housing Prices

Because of its choice location and dense population, housing is at a premium in Rhode Island. Even so, the state has been affected by the national housing slump. Median home prices in Rhode Island peaked at over $275,000 in 2006, and began 2007 above $250,000. However, declines in each of the last ten months of 2007 drove prices down to $225,000 by year end.

Significantly, the volume of home sales fell by 11.2% for 2007 compared with 2006, with the worst two months for volume declines coming in the latter half of the year. This falling sales volume can be an indication of weakening demand, which in turn could signal further price declines to come.

It's easy to focus on the negative aspects of the housing slump, but the fact is that it also represents the best opportunity in a long time for new home buyers. Effectively, those price declines have turned back the clock, giving buyers an opportunity they may have thought they'd missed forever.

Mortgage Rates

Mortgage rates also represent a bargain relative to recent levels. Even though thirty-year rates recently edged above 6.0% for the first time since the first week of 2008, those rates remain below where they were throughout 2006 and 2007.

Also, since mortgage rates remain within 1% of their historical lows, and 12% below their historical highs, they represent a bargain from a longer-term perspective, as well as in comparison to recent history.

A Silver Lining for Home Owners

While falling home prices will not be welcome news to people who already own homes, lower mortgage rates represent a silver lining for this group. The sharp fall in interest rates since last summer represents a refinancing opportunity for many mortgage holders. Indeed, the first several weeks of this year were marked by a noticeable increase in refinancing activity.

Notably, even with mortgage rates bouncing back up more recently, the refinancing opportunity should not be over for everybody. As long as mortgage rates remain near their historical lows, it is likely there are still home owners out there who could benefit from refinancing.

With inflation becoming an increasing concern, the way home prices and mortgage rates have turned back the clock should be welcome news -- it is refreshing to see something getting cheaper for a change.

Sources

• Providence Business News
• Freddie Mac

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.