Currently with HomeSmart Professional Real Estate since 2014, Allyn's real estate transactions are primarily in North Smithfield and downtown Warwick, but more recently she has also been representing home sellers in Westerly. Allyn is a member of the Kent She Washington Association of Realtors and was the first recipient of the Lord Her Island Her Home Smart Her Spirit Award as voted on by her colleagues.
PBN: What are the current inventory levels in Rhode Island? Do you expect any major changes after this year?
Allin: According to MLS [Rhode Island Statewide Multiple Listing Service], Rhode Island currently has 706 single-family homes for sale across the state. Of those, 243 are under his $400,000 price range, a common price range for first-time buyers. Conversely, on the other end of the spectrum, 154 pieces cost him more than $1 million. Changes will be made if inventory increases. This allows for more and better options for buyers and reduces competition among potential buyers leading to bidding wars. This market is likely to continue for some time until inventories improve significantly. At current inventory levels, we only have about a month on hand. Months on hand means the number of active listings divided by the average monthly sales. It takes approximately 6 months of inventory for the market to “balance”.
PBN: What is the outlook for 2024, and how will the real estate market perform given the evolution of interest rates and inventory levels in Rhode Island?
Allin: There are many factors to consider, including interest rates. High interest rates are keeping sellers out of the market because replacing an existing mortgage, even with a downsized home, costs more than the current mortgage. Still down 44% from pre-pandemic levels, many sellers who took their homes off the market refinanced them at interest rates of 2% to 3%. The current interest rate is just under 7%, down from 8% at the end of last year. This increase gives people pause. Industry experts expect interest rates to fall and reach around 6% by the end of the year. Experts believe this should increase inventory and give buyers more choice. That being said, many factors need to align for that to happen. The economy and world situation must remain stable.
PBN: How difficult is this market for first-time homebuyers and why?
Allin: The difficulty for first-time home buyers in the real estate market depends on several factors.
- One is the rise in housing prices. Home prices are rising in many markets, making it harder for first-time buyers to afford a home. A lack of housing supply is one reason for this soaring price.
- Second, housing stock is limited.
- Third, the approval standards for mortgage loans are strict. Lenders may have strict criteria for mortgage approval, making it difficult for first-time buyers, especially those with limited credit history or low down payments.
- Fourth, down payment requirements. Depending on the financing program, buyers may be required to make a minimum down payment of approximately 3.5%. Conventional loans can start as low as 5% to 10% of the purchase price.
- Fifth, student loan debt. Many first-time buyers have student loan debt, which can impact their ability to qualify for a mortgage and handle the additional financial responsibility.
- Sixth, interest rate.
- Seventh, market competition. The presence of investors and cash buyers in the market can make it more difficult for first-time buyers to compete and secure low-cost or distressed properties.
For first-time homebuyers, researching the local market, understanding your financial capabilities, and seeking the guidance of a real estate professional or financial advisor is essential to navigating these challenges. There are also government programs and initiatives available to assist first-time buyers.
PBN: What does a more balanced real estate market look like and how can we get back to it?
Allin: To achieve a more balanced market, inventories will need to increase significantly. In a balanced market, there is about six months' worth of inventory on hand. Currently, more than 700 homes are sold each month in Rhode Island, and the state needs six times that number, or 4,200 homes, to go on the market. A balanced market favors both buyers and sellers, without favoring one over the other. Sellers currently have an advantage, leading to bidding wars, inspection exemptions, and buyers making up for disparities in valuation. We need to build more housing, but we also need an easier path to converting vacant commercial buildings into living spaces. Both will be of great help.
PBN: What do you think about people using online self-service programs to try to sell their home or buy a new home instead of using a licensed real estate agent?
Allin: Although self-service programs have several benefits, the decision not to use a licensed real estate agent should be carefully considered based on personal preference, expertise, and the complexity of the real estate transaction. My job in a transaction is to offer the seller the best price and terms. Most sellers who think they can do it themselves end up with less favorable terms and prices due to lack of negotiation experience or emotional attachment to the property. It's important to weigh the potential cost savings against the value a real estate agent can bring in terms of expertise, negotiation skills, and legal guidance. One of the main reasons people choose self-service programs is to save on real estate agent fees, which can represent a portion of a home's sale price. Online platforms allow individuals to have some control over the sales process. Users can manage listings, negotiations, and transactions at their own pace. Unfortunately, everything happens so quickly that the market doesn't have the patience for it. There are also disadvantages. Limited expertise. Licensed real estate agents use their expertise and experience to help clients navigate complex real estate transactions, negotiations, and legal aspects. If you go without a real estate agent, you may be missing out on professional guidance and wasting your money. Real estate agents have access to a broader marketing network and can help sellers reach a wider audience. Without a real estate agent, sellers can face challenges in effectively marketing their property. Real estate transactions involve legal and contractual complexities. A licensed real estate agent can provide valuable advice to ensure the process complies with relevant laws and regulations. Real estate agents are skilled negotiators who can advocate for favorable terms on behalf of their clients. People with no real estate experience may find negotiation difficult. Managing real estate transactions is time-consuming and requires attention to detail. An individual may need to invest a significant amount of time, much like a full-time job, which can be very demanding.
Marc Larocque is a PBN contributor. Please contact Larocque@PBN.com. You can also follow him on Twitter @LaRockObama.
