The number of existing homes (units) sold in the 1st Quarter of 2007 are up 1.25% over the same period in 2006 for the state of RI. In the Providence area, however, we saw a 17% decline in unit sales, and sales for the East Side of Providence are flat over last year.
Prices of existing homes in Providence have remained fairly constant over the last 12 months, with prices increasing only 1.21% from 2006 to a median price of $209,500. The average days on market (DOM) for Providence increased to 85 from 64 since the first quarter of 2006. On the East Side of Providence, home prices were more drastically reduced to a median of $422,500 from $575,000 a year ago--a drop of 26.52%. This probably contributed to the slight reduction in DOM from 86 in 2006 to 79 in 2007.
The data seems to suggest that once hot markets are experiencing a correction-not a sharp decline in activity. The majority of markets in RI with median home prices greater than $350,000, for instance, show the greatest decline in median sales prices, but still post increases in unit home sales over the same time last year.
The national data seems to echo this. According to the latest NAR data available, existing home sales are expected to be softer in the 1st half of the 2007 but gradually trend upward by the end of the year. On a national average, the NAR expects home prices to ease by 1.3% before rising again 1.7% in 2008. However, the NAR warns that comparing median sales prices for existing homes is skewed nationally because of a shift in sales volume from high-cost areas to more moderately priced markets.
The bottom line is that real estate, in general, is still a great long term investment. The market has not "bottomed out" and the situation is not as dire as the media would have you believe. Some very hot markets that saw bidding wars 2-3 years ago are now experiencing corrections that are bringing sales prices back down to what the market can truly bear. The graph, borrowed from AgentCEO, illustrates this point eloquently: There was a sharp increase in median home prices from the 1st Quarter of 2005 to the 2nd Quarter of 2005 (nationally). The market topped out in the 3rd Quarter of 2005, but has been more or less stable since then. As I've already mentioned, the NAR predicts median home prices to decline 1.3% to $219,100 by the end of 2007--virtually no change from 1 year ago.
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