So I charted the median sales prices of single family and multi family houses in Pawtucket for every month since January of 2005. I thought it would be helpful in getting a big picture look at our local market.

I think its pretty obvious that the multi family market has been hit more severely than the single family properties. I don’t think anyone knows when to call the bottom of this decline.

There is also an interesting article on CNN.com that said 25% of sellers are selling for less than they owe on their mortgage. Taking all of this into account, it doesn’t seem that enough has changed in the market that would suggest a turnaround…yet. On the bright side, the price of oil has dropped significantly which should allow for some room the breathe. I’ll keep you posted on how our local market is doing when I get the new sales numbers each month.

-Keith

Hey everyone,

I found this great calculator for evaluating investment property. Click here to check it out.  You do have to make some assumptions for price appreciation, inflation, rent increases, etc.  However, if the property can generate positive cash flow its probably a good deal.  By the way, don’t forget to give yourself a little room to breathe by assuming some vacancy in the apartments.

- Keith

Hey everyone. My name is Keith Custodio. I’m Martin Custodio’s son and work with him at the agency. I thought I’d chime in once in a while on the blog. You can find out a little more about me on the “Our Agents” portion of the site.

Anyways, I attended the ribbon cutting ceremony for Phase 1 of the Union Wadding Lofts today. The development is located on 125 Goff Avenue in downtown Pawtucket. I had a chance to tour some of the units and speak to the developers. They really did a wonderful job with the conversion. You can find out all about the project here. I have long been interested in the revitalization of downtown Pawtucket and have followed some of the old mill buildings that are being redeveloped (The Riverfront Lofts, The Bayley Lofts, etc.)

There are 2 things that need to happen, in my opinion, for this downtown to really make a comeback:

1. The Central Falls/Pawtucket train station needs to be redeveloped and put into commuter rail service to the greater Boston area. The city has been working on this for some time. I truly hope it happens. I believe it will bring young professionals to the area which is the demographic that desires these type of lofts.

2. The city needs to to bring in some new businesses which will in turn create jobs for these young professionals. I don’t think it can depend solely on those professionals willing to commute to Boston.

It’s a tough problem to solve but I really believe that downtown Pawtucket can become a vibrant community. Slowly, the old industrial space is being converted to residential. Now the city needs to attract the professionals that will desire new retail, entertainment, restaurants, etc. Then things will really get moving along. The only way to do that is by creating jobs for them or making it easy to commute. I say do both.

-Keith

Here is a good article from CNN.com explaining the problematic cycle I was trying to explain in the last post. The basic point of the article is summed up in this quote:

“Lower prices lead to more defaults, resulting in excess inventory, which causes demand to fall, bringing home prices even lower, leading to more defaults.”

So…that means prices may still have a ways to go down. While Rhode Island wasn’t as overblown as the California and Florida markets it still is showing serious signs of weakness. I was at a conference held buy Countrywide last Friday where one of the speakers, a medium-level executive that represents Rhode Island and several other New England states, said that “…in Rhode Island, 50% of sales are either REO or short sales.” What this means is that 50% of the sales are from foreclosed houses that the banks now own (REO) or owners who are selling for less than they owe the bank (short sales). Since foreclosures aren’t slowing, they’re actually accelerating, I believe prices should continue to drop. When foreclosures finally decrease from month to month, then we may see a bottom finally approaching in the Rhode Island real estate market.

-Martin

I thought some of you might like to read a response to the Wall Street Journal article I posted yesterday. Here it is. This author makes 2 really good points:

1. “Because they always do”, as a reason for a housing sales and price rebound, is a bad reason.

2. Many buyers, even ones with great credit and solid incomes, will not be able to afford the 10% or 20% down payments the banks are asking for now.

It’s a very tricky situation. The scenario seems like this: Oversupply and priced out buyers create more downward pressure on prices. This in turn puts more homeowners owning a home that is worth less than their mortgage aka “upside-down”. Thus, more foreclosures and short sales occur which puts even more pressure on prices to go down. Interest rates cannot go much lower and the Fed has signaled that another cut won’t be coming soon. The interest rates are becoming secondary at this point. It’s the tighter lending criteria from the banks and the down payments that are making it harder and harder to get a mortgage. Maybe the only solution is for the banks to raise interest rates higher and lower the down payment levels. This would compensate them for the additional risk they are taking on while allowing buyers back into this real estate market. Any ideas?

-Martin

Whooo hoooo!!!! I read an article in the Wall Street Journal yesterday claiming that the housing market has hit rock bottom. Read it here.

Now I must admit the author makes a good argument, however, I’m going to have to disagree. From where I’m standing the downtrend is still accelerating not to mention bottoming. Every month that passes has brought inventories higher, less homes sold, and bigger and bigger price declines. If you read my last post regarding the year over year comparison of single family home sales in April you will see my point. I have yet to see a month that has been better than the previous one. I doubt April ‘08 will mark the bottom of the housing downturn – at least not in Rhode Island.

-Martin

So I was looking through some MLS statistics for the Pawtucket area. I searched for all single family sold houses in April of this year and compared it to the single family sold houses in April of last year. Not surprisingly, I found that prices have gone down pretty sharply – to the tune of almost 16%. That’s a pretty serious drop in one year. Making that even worse is the fact that the number of houses sold dropped by over 20%. This has become a highly competitive market.

In my opinion, this is not over yet. There are massive amounts of houses for sale, less buyers, tighter lending practices at banks, and a flood of foreclosures on the market. All of these factors equal one thing – downward pressure on prices.

For those thinking of selling their homes, the price has to be competitive. You have to find a way to make your house stand out from the crowd.

For the buyers out there, this is a great time. Shop around.

- Martin

First off, I should start with an introduction. My name is Martin Custodio. I started Custodio Realtors, an independent real estate agency in Rhode Island, over 30 years ago. Throughout that time, I’ve seen many ups and downs in the market and have experienced several “cycles”.

We’re definitely going through a downturn in the market currently and I thought that creating a blog to share my experience might be helpful to some. Hopefully it will. I’ll try to keep you as up to date with my own personal experiences in the Rhode Island market as well as share some of the bigger, nationwide stories that catch my attention in the news. Talk to you soon and feel free to e-mail any questions you might have.

- Martin