As we head into the final quarter of 2024, it’s no surprise that Rhode Island’s real estate market remains as competitive as ever. If you’re buying or selling a home, you’ve probably noticed the ongoing price appreciation and limited availability. Here’s what’s happening in the market right now and what you should expect as we move into 2025.
October 2024 Market Snapshot
The latest numbers from the Rhode Island Association of Realtors show that the median sales price for single-family homes in October 2024 hit $485,000, up 6.6% from this time last year. While prices continue to climb, inventory is still tight, with only 2.4 months’ supply of homes available—well below the 6-month threshold that signals a balanced market. Homes are moving quickly, spending just 31 days on the market.
What This Means for Buyers
I know some of you are wondering if it’s better to wait until prices or mortgage rates drop. Let’s talk through that. Here are 3 reasons why mortgage rates aren’t going down like you thought they would (or heard):
1. Mortgage Rates Aren’t Tied Directly to Fed Rates
There’s been a lot of buzz about rate cuts, but it’s important to know that mortgage rates are more closely tied to the 10-year Treasury bond, which has been steadily increasing. The rate cuts you’ve heard about don’t necessarily mean mortgage rates will follow suit. That said, they are much lower right now than they were this time last year when they were nearly at 8%.
2. Strong Economy Keeping Rates Steady
The U.S. economy is stronger than expected, and as a result, mortgage rates are likely to remain steady or only drop slightly. The idea of a massive rate cut is unrealistic unless there’s a significant economic shift.
3. Loan Level Pricing Adjustments (LLPAs)
About a year ago, Fannie Mae and Freddie Mac introduced changes to how mortgages are priced, known as Loan Level Pricing Adjustments (LLPAs). These adjustments can make rates more unpredictable. It’s why quoting a mortgage rate off the cuff is not just unprofessional, but dangerous–I am deliberately using that word, not to be overdramatic, but because having unrealistic expectations, or working with the wrong person can cost you thousands of dollars! Because of LLPA’s, even if you have great credit, factors like down payment and loan type could mean your rate is higher than the national average.
The Inventory Dilemma
What’s driving the price increases? It’s not just high demand; it’s lack of inventory. This isn’t a case of buyers backing off because of high rates—it’s a matter of not enough homes being available for sale. In fact, Rhode Island ranks dead last in new construction across the country, meaning there simply aren’t enough homes to meet demand. And that continues to push prices up year after year.
You may be one of those folks that says, “Prices can’t keep going up!” And I hear that, I do. But I’ve been in this industry for almost twelve years and I’ve been listening to people say that since at least 2018, maybe even before then. In 2017, the median sale price for single family homes went from $239k in 2016 to $255k in 2017, from there it rose to $270k in 2018 to $285k in 2019—those were impressive gains back then. But in 2020 the median sale price jumped to $319k and then spiked to $365k in 2021–massive gains! And here we are in 2024 and our year to date is around $460k. I’ve said it in previous market updates and I’m going to say it again—I believe that we will reach a median sale price for single family homes in Rhode Island of $600k. Likely within the next 5-7 years. If you do not believe me I’d ask you to set aside your “beliefs” and tell me, with the available data, what will be the driving factor(s) to bring prices down or to stabilize them so that we no longer experience 6%+ year over year gains?
What Sellers Should Know
For those of you thinking about selling, 2024 has been a fantastic year to list your home, and it’s likely this trend will continue into 2025. With such a limited supply, buyers are competing for homes, and this has kept prices strong. While more homes are hitting the market now compared to earlier in the year, we’re still well below what’s needed to balance out supply and demand. If you’re ready to sell, this is still a great time to do it. Here are a few things to understand:
Quick Sales
Homes are moving fast, with most going under contract in about 31 days. We have seen this slow down since late August with buyers pushing back at sellers who over-valued their home. Especially in higher end properties over $750k.
Pricing Advantage
As a seller, you’re in a great position to get top dollar for your home if your home is in great condition and presented well. But when buyers have slightly more options if your home needs work there’s a good chance they’re going to pass it by if the work needed isn’t reflected in the price.
Seasonal Slow Down
Buyer demand and housing inventory trends are fairly predictable and can significantly impact your home sale strategy. Typically, there’s less competition among sellers in the winter months, but you may also find fewer buyers, particularly around the holidays. On the flip side, the Spring market is when both inventory and prices tend to peak, offering more opportunities but also more competition. For buyers, the late fall and winter months can actually offer advantages: with fewer competing buyers, you may face less stress and have more negotiating power. For sellers, waiting for the Spring can make sense, but regardless of the season, if your home is priced correctly, it will sell.
Bottom Line: What to Expect in 2025
Looking ahead, don’t expect the Rhode Island market to change drastically. Prices will likely continue to rise, though the rate of increase may slow somewhat. Inventory will remain tight, and interest rates are expected to stay relatively steady. For both buyers and sellers, the key to success in this market is being informed and ready to act.
- Price Growth: Expect home prices to increase by about 5-8% in 2025.
- Mortgage Rates: Rates will probably stay where they are or drop slightly, but a significant decrease isn’t likely. They’re currently in the mid-6% range.
- More Inventory (But Not Enough): We might see more homes hit the market as sellers who were waiting out high rates decide to move, but it won’t be enough to significantly ease the housing shortage.
Final Thoughts
Whether you’re buying or selling, the Rhode Island real estate market is still moving, and you need a plan in place to navigate it. Waiting for the market to “burst” or for rates to drop could leave you paying more in the long run. The best strategy is to work with a knowledgeable advisor who understands the local dynamics (because what you hear in national news doesn’t always apply here!). If you want to talk through your options, reach out—I’m always happy to help you plan your next move.