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Homeownership is shifting from the American dream to the golden ticket – wealth for some but not all.
The numbers are stunning. For homebuyers, especially first-time buyers, the obstacles are piling up.
Rhode Island’s top broker Kim Marion discussed the impact of rising interest rates on the cost of monthly mortgage payments in an interview on GoLocal LIVE on Wednesday.
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“This time last year, the average mortgage was around $1,265. This year’s average mortgage is $1,944. That’s an increase of 53%. It’s like you added a luxury vehicle to your payments, but you didn’t get the car. It’s a $674 difference every month — think about it,” said Marion of Mott & Chace Sotheby’s International.
Marion’s data is based on mortgage rates that have risen from less than 3% last year for a 30-year lock-in to more than 6% now.
This does not take into account Wednesday’s announcement by the US Federal Reserve that it would make another 75 basis point hike. This is likely to drive up borrowing costs even further.
Real estate prices are falling in large parts of the country. But there is no homebuyer relief in Rhode Island. The median price of a single-family home remains $405,000, according to published data
“Sales activity continued to decline for the seventh straight month, down 11.4% from 12 months. The number of days a home stayed on the market remained flat at 29 days, as did 1.8-month inventories — which remained well below that of a balanced market indicated by a six-month supply of homes for sale will,” the RI Association of Realtors said on Wednesday.
“Although inventory is increasing slightly, options are still extremely sparse. That and the rise in mortgage rates are reducing the number of buyers in the market. However, there may be opportunities, even with higher interest rates, to secure stable home ownership payments through home ownership and thereby gain the opportunity to build wealth through equity. They should also be aware that if they wait for prices to drop significantly, it’s not likely to happen anytime soon given the housing shortage that still exists,” said Agueda Del Borgo, president of the Rhode Island Association of Realtors.
Although condos sold in August saw a 15.6 percent increase in median price to $313,338 compared to 12 months earlier, they proved a much more affordable entry point for those struggling to own a home. The days a condo stayed on the market fell to 27 from 32 in August 2021, and sales were down 17.7%.
At $424,500, the median price for multifamily homes continued to be the highest of the three sectors, largely due to demand from investors looking to take advantage of rising rents. Days on the market fell to 25 from 29 in August 2021, down 13.8%, and closed sales fell 10.8%.
“Over the past five years, the median cost for multi-family homes has increased by 93%, compared to 56% for single-family homes and 42% for condos. They were clearly viewed as a good investment, and as long as rents continue to rise and exceed operating costs, they will remain so,” Del Borgo said.
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