Rhode Island housing market faces problems heading into buying season

(WJAR) — Rhode Island is experiencing critically-low housing supply and record-high prices.

Earlier this month, the Rhode Island Association of Realtors put out a statement saying the local housing market is facing several big challenges:

• There are very few homes on the market.
• The homes that are for sale are incredibly expensive.
• Inventory isn't moving - homes sales are down almost 40% year over year.

“The last 40 years, the average interest rate has been over 7%, so we're not in a bad interest rate environment, we've just been spoiled over the last number of years where there were extremely, extremely low interest rates,” said Bryant Da Cruz, president of the RI Association of Realtors. ”So, a lot of people took advantage of the refinancing at the lower rate, so from a psychological standpoint, if you have a house - let's say you owe $400,000, $500,000 - but your interest rate is only 2.5% and you're thinking about downsizing or upsizing, when you then double the interest rate it plays into your psyche, but it also plays into your pocketbook.”

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Da Cruz says it doesn’t help that the homes that are for sale are expensive; the median sale price in Rhode Island is almost $400,000.

He said right now, only seven of Rhode Island's 39 cities and towns meet the state's affordable housing requirement.

"From the perspective of there just not being many affordable homes, what would you like to see the state do?” asks NBC 10’s Emily Volz. “What would you like to see the city and towns do? Are there any concrete changes that could be made now that would help?”

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Da Cruz said, “I think zoning laws and regulations should become less restrictive, you know, simple things like changing density requirements in certain areas of certain cities and towns can go a long way that can allow developers to put more units on a certain piece of property.”

Another big problem: wealthy out-of-state buyers, as well as companies that have been flipping homes for profit - often turning them into rental properties.

Da Cruz said that has greatly increased home prices in Rhode Island over the last few years.

He said despite the current prices and interest rates, he still expects sales to increase in the coming months – though it certainly won't be at the pace it was last spring.