The second highest unemployment in the nation means a rough road for Rhode Island's housing market. With foreclosures running rampant in the state, Rhode Island could see some of the highest deflation numbers on the East Coast. For more, see the following article from Housing Predictor.
It may be the smallest state in geographical size in the nation, but it's nothing short of being a power-house in terms of economic fortitude. Despite its mansion estates, as a mostly working class state Rhode Island is ailing through the financial crisis as a state separated by the super rich and the poor. More than 1 out of 10 homes are either in foreclosure or in default.
The crisis hit the state and thousands of Islanders fled. State taxes didn't help. Rhode Island has one of the highest property tax rates in the country, yet the pitfalls didn't stop government from angling for more ways to get more tax revenues as unemployment rises. Rhode Island has one of the highest unemployment rates in the country, second only to Michigan.
In Providence the foreclosure epidemic has damaged the local economy so much that the city passed local ordinances intended to prevent foreclosures. The laws require mortgage lenders to meet with homeowners before foreclosing on a home to try and work out a solution, including modifying the mortgage. The laws also require lenders to give tenants a longer notice before evicting them from rental property. A 90-day federal law in effect is intended to give tenants enough time to find another rental.
Home sales are rising in Providence, but are mainly foreclosures. Providence has felt a severe impact from the financial crisis but is projected to see improving home sales as prices decline further. Average housing deflation in Providence is forecast to hit 16.4% in 2009.
Local Rhode Island Housing Markets at a Glance
| City |
Forecast |
| Providence |
− 16.4% |
| Newport |
− 17.5% |
| Warwick |
− 14.2% |
| Portsmouth |
− 13.0% |
In Newport, where the America's cup made its U.S. yachting claim to fame waterfront estates are second homes for many of the wealthiest families in the nation. But when the bubble burst Newport tourist trade slowed and remains at a slower pace as do home sales. The stock market crash coupled with real estate price declines were too much for the economy to handle. Buyers' interest in housing has resurfaced in Newport, but not enough to yet bolster the market, which is forecast to sustain average housing deflation of 17.5% for the year.
In the state's second most populous city, Warwick home sales are climbing mainly because of lower prices and low mortgage rates. Foreclosures have provided a market for Warwick after three slow years of home sales. However, the number of unemployed people exhausting benefits and still out of work is reaching a new high, which is producing another round of foreclosures. Housing Predictor forecasts Warwick will experience average housing deflation of 14.2% for the year.
The $8,000 federal tax credit for first time buyers has triggered a rise in home sales in Portsmouth removed from big city problems along the Atlantic Ocean, but anything but removed from the national financial crisis. Few homes sell in Portsmouth each year, but those that are selling are going for less than in the past with forecast average home deflation for the community of 13.0% in 2009.
This article has been republished from Housing Predictor. You can also view this article at Housing Predictor, a real estate analysis and forecasting site.
