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Increasing First Time Buyer Market Lowers Median Price
Wednesday, May 06, 2009

Warwick, RI, May 6, 2009….An analysis of home sales statistics for the first quarter shows virtually all sales activity occurring in the lower priced market, according to the Rhode Island Association of Realtors.  The majority of existing single family home sales, 83 percent, involved properties valued at less than $300,000.  By comparison, 62 percent homes valued in that price range sold in the first quarter of 2005.  Homes under $150,000 accounted for 3.6 percent of the market three years ago;  they now account for 37 percent of all single family sales.  Condominium sales were similar, with 80 percent of first quarter sales occurring in the under $300,000 price bracket.  Forty-two (42) percent sold for $150,000 or less.

The analysis helps to explain the dramatically lower median prices of single family and condominium sales in recent months.  Median price represents the mid-point of sales, where half the properties sold for more and half the properties sold for less.  It does not represent spikes or drops in value in the same property over time, but reflects the mix of properties (price and size) on the market.
Four hundred and seventy-four (474) single family homes sold for less than $150,000 from January to March; 559 sold in the 150,001 to $299,999 price band; and 158 sold priced at $300,000 to $499,999. Seventy-seven (77) condos sold for less than $150,000 and 71 sold between $150,001 and $299,000.  Twenty-four (24) sold from $300,000 to $499,999.

“Conventional mortgage rates and first time homebuyer incentives have improved substantially, and housing affordability has reached 1998 levels.  That’s really impacted the growth of the lower end market,” explained Paul Leys, President of the Rhode Island Association of Realtors.  Rates on conventional rate mortgages – loans for less than $417,000 – averaged around five percent in the first quarter.

The percentage of foreclosures and short sales for single family homes sold for more than $500,000 in the first quarter was only three percent compared to a 45 percent rate of distressed sales overall. “As you move into the higher priced home markets, our statistics tell us that home owners don’t have to sell so they can ride out the market,” said Leys.  The smaller percentage of high end inventory and sales is lowering the median price, giving consumers a false sense of real estate values overall he further explained.

According to Lawrence Yun, Chief Economist of the National Association of Realtors, the bulk of the effects of the $8000 home buyer tax credit which was passed in late February should begin to become apparent in June and July, encouraging movement in the first time homebuyer market. That is expected to raise the median sales price as sellers of first time homes begin to trade up.