Learn more about the housing market in Rhode Island

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

Rhode Island Housing Market Overview 

Rhode Island has many commonalities with the general United States market. Rhode Island and numerous other states have struggled with low inventory due to the hike in mortgage rates. Median home prices have climbed as well, making it difficult for homebuyers to attain a property that’s below 30% of their monthly income.  

The median days on market is very low, with some homes going pending in under ten days. This competition makes it hard for prospective buyers who have managed to save up enough for a home in this tough market, because they will most likely have to shell out more than listing price to shoulder out other buyers.  

Rhode Island is also the smallest state in the nation. Though it’s also the second densest, incoming Rhode Islanders may find that the already lacking inventory is even more apparent in a market as small as the Ocean State’s. 

While the information below is based on generalizations based on current data, if you’re serious about finding a home in Rhode Island, it’s a good idea to sit down with a trusted financial professional or real estate agent to see where you stand in this market. It’s very possible that you may have to wait in the sidelines for rates to fall.  

Rhode Island Housing Market Trends 

To understand the Rhode Island real estate market, it’s important to keep up with trends. Let’s look at some key ones in Rhode Island: 

Note: These statistics are based on Redfin’s monthly housing data from April 2024. 

Median Home Price 

The median home price in Rhode Island is $489,100 as of May 2024, a 6.2% increase from that time last year. Rhode Island is pricier than the national average home price of $438,610. However, the Northeast region in general tends to trend towards more expensive prices, and Rhode Island is cheaper than most of its regional neighbors.  

Number of Homes Sold in April 2024 

840 homes sold in Rhode Island in April of 2024, according to Redfin. This represents a 7.4% increase year-over-year, a positive sign for a market that has so far been characterized by low supply and stiff competition. However, while this metric initially seems promising, it’s important to keep in mind that this number might be inflated compared to other months. Nationally speaking, sales usually peak during the spring and summer months and slow considerably in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median DOM in Rhode Island is 20 days. The national average is 32 days, so Rhode Island is pacing well below the country’s median.  

New Supply Statistics 

In terms of new construction, there were about 1.27 new residential construction permits issued per every 1,000 people in Rhode Island in 2021. While this trends below national averages for residential construction permits, it’s important to note that Rhode Island is the smallest U.S. state in terms of area, and the 7th least populous, so certain metrics may be behind the averages for other states. 

In terms of months of supply, Rhode Island has two months’ supply. This metric measures how long it would theoretically take for all the homes on the market to sell if no new listings came onto the scene—five to six months is considered stable, and the lower the number gets, the more it shows a seller’s market since buyers will be more and more limited in terms of choice.  

Property Tax Rate 

Rocket Mortgage reports that Rhode Island’s average property tax rate is 1.40%, which is the 12th lowest rate in the country. It’s important to point out that property taxes vary widely depending on the specific county of Rhode Island and the value of the home, so this average rate may or may not be indicative of your situation. 

Foreclosure Rate in Q1 of 2024 

Rhode Island currently has a foreclosure rate of 1 in every 2,910 housing units. This is a relatively low metric, and Rhode Island comes in at number 37 in terms of number of homes that experienced a foreclosure filing according to recent data from ATTOM.  

Hottest Local Markets in Rhode Island 

1. Providence

Providence has no shortage of appeal for prospective homebuyers. USA Today ranked Providence as the second most walkable city in the nation, and it’s a self-proclaimed foodie’s paradise.  

Providence’ housing market Rhode Island is very competitive—its median sale price jumped over 19% since last year to just over $500,000. Many homes get multiple offers and can sell for 7% over list price with waived contingencies.  

However, due to rising mortgage rates, the number of homes sold in this area dropped slightly to 127. This trend of decreasing supply is common throughout the nation and is not by any means unique to Providence. As a result of the low inventory and stiff competition, homes sell quickly. The median days on market in Providence is 20 days—the country’s median is 32.  

2. Pawtucket 

Pawtucket is currently a hub for Rhode Island art and culture, but it’s also the birthplace of the American Industrial Revolution. Pawtucket has an interesting mix of industry, small businesses, and the arts.  

The Pawtucket housing market is booming, with each home receiving an average of six offers and selling in around 17 days. The median home price is up 15.3% and the average home sells for $417,500.  

The number of homes sold has dipped slightly. Last year, there were almost 2% more homes selling than there are now, but that percentage is not large enough to cause alarm. The number of homes selling with price drops has decreased, indicating that the market is favoring sellers and that buyers may have to shell out more than listing price.  

3. East Providence

East Providence is another hot market in Rhode Island, and it’s the fifth-largest city in the state. Niche.com says that East Providence has great nightlife and offers a suburban feel while simultaneously offering many options for bars, restaurants and coffee shops.  

Homes in this area are tough to snag, with Redfin categorizing it as very competitive. Homes tend to go pending in as little as 7 days, with the average not much higher at 13 days. Average homes sell for around 3% above list price, and the hottest homes can sell for as much as 8% above.  

Supply seems to be trending upwards. There was a 27.8% increase in homes selling in this market since last year, and 46 homes were sold this May.  

If you’re interested in East Providence, it’s good to know that its median home price is $407,500, over $80k less than the Rhode Island average. Perhaps the lower sale price is why this city has become so popular in recent years.  

Economic Factors Impacting the Rhode Island Housing Market 

A holistic view of the housing market Rhode Island currently boasts requires a basic understanding of the main economic drivers affecting the market. Let’s look at a few critical ones below: 

Mortgage Rates 

Current 30-year fixed mortgage rates in Rhode Island are 7%, according to Bankrate. This is right on par with the nation’s current average mortgage rate, which is higher than recent years. Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “tied” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current if they move to a new property. Prospective buyers would be wise to monitor mortgage rates in the coming months for a better understanding of how they impact the housing market in Rhode Island.

Inflation and Cost of Living 

Mortgage rates relate directly to inflation, another massive contributing factor to the affordability of housing and the status of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in Rhode Island. This means fewer people can truly afford to limit housing costs to less than the recommended 30% of their monthly income.  

Population Changes and Demographics 

Rhode Island unemployment rate is at 3.1%, below the nation’s average of 3.7%. Rhode Island’s population rate has been slightly declining in recent years—the U.S. World Population Review blames this decrease on the aging population, estimating that there will be some growth between now and 2025.  

A population decline may not be the worst thing for Rhode Island. It’s extremely populated for being such a small state and has very little capacity for further growth.  

Rhode Island Housing Market Forecast 

Rhode Island will most likely continue on its path of competitive markets and increasing home prices. Baby boomers are reluctant to leave their homes in the face of increasing mortgage rates, and the current average age of homebuyers is now 49. Home prices have increased to levels that are unattainable for many young professionals or blossoming families.  

Until inflation and mortgage rates fall, it’s unlikely that younger buyers can once again realistically afford the average Rhode Island home. However, despite the exclusion of the younger demographic, there is no shortage of demand.  

Likelihood of Rhode Island Housing Market Crash  

The hottest markets are those that have plenty of buyers and a quick pace combined with low inventory. Rhode Island’s low inventory has been keeping prices lofty despite high interest rates, but demand remains. The median DOM is much lower than the national average, signifying a frenzy for the few homes that do hit the market.  

As long as there is demand for Rhode Island homes, a housing market crash seems unlikely anytime soon. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at the housing market in Rhode Island, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.  

Rhode Island Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

This short summary leads directly into Rhode Island’s current rental market, with key trends from Zillow:

Rhode Island Rental Market Key Trends 

• Median Rent: $2,200 

• Month-Over-Month Rent Change: -$50 

• Year-Over-Year Rent Change: $0 

• Available Rentals: 1,650 

Conclusion 

The Rhode Island housing market in 2024 is marked by a blend of stability and challenges, making it crucial for potential buyers and sellers to stay informed about market trends. Whether you’re looking to purchase a home soon or sell your property in RI, the macro- and micro- economic trends outlined above will impact your decision-making. Market dynamics like changes in home prices, inventory levels, and interest rates will continue to be critical for stakeholders in local real estate.