Home sales in Rhode Island fell by 1% in March, and the median price, $235,000, was up by 2%, but a 26% fallout in pending sales signals a further slowdown in the coming months.
"Lack of inventory is a primary factor in the restriction of sales in progress," the Rhode Island Association of Realtors said in its report on March real estate sales, released Thursday.
"The last time we saw supply this low heading into the spring selling season was 2005," said association president Brenda L. Marchwicki.
There were 3,281 single-family houses available for sale in Rhode Island in March, down from 4,044 in March 2016. This is a 3.6-month supply, and a six-month supply is seen as indicative of a balanced market. Anything under six months tends to favor sellers, while a bigger inventory puts buyers in the driver's seat.
The "days on market" for March was 74, down from 94 the year before, another indication of how quickly many homes are selling.
Many years of lagging new-home construction is part of the problem. According to David Caldwell Jr., a builder and the president of the Rhode Island Builders Association, there are too many barriers to building housing for the middle class.
"The $200,000, $300,000 market is really going nuts," Caldwell said. "It's really going crazy right now." But while the costs of "bricks and sticks" are about the same across the country, land costs in Rhode Island are especially high, he said. And local land regulations that require large house lots and provide other barriers to density increase the cost of new housing, he said.
"We used to call them starter homes," Caldwell said. But "the municipalities don't want it... There's a distortion in the market," he added. "If we're going to grow...the market should be producing more housing at the price the market demands."
"If we want to attract businesses to our state, we need to ensure that there is enough housing to support our workforce, and unfortunately, Rhode Island ranks dead last in the country for housing starts and building permits over the last six years," noted Barbara Fields, executive director of Rhode Island Housing. "The $50 million housing bond passed by Rhode Island voters last year will help, but we still must continue to do more."
