If you heard a loud boom on the East Side this summer, it’s probably more than just some leftover fireworks from Fourth of July – more likely it was the sound of the real estate market exploding. By any measure, our little corner of Rhode Island is arguably the single hottest real estate market in the state.
“I’m having one of the best years I’ve had in real estate – and I’m 84 years old,” says Ed Bishop. His E.F. Bishop Group has been around since 1965, so he’s seen his share of boom times – but few have been this big.
The numbers speak for themselves. According to the Rhode Island Association of Realtors and State-Wide MLS, sales on the East Side were up 68% for the first quarter of this year (the most recent for which figures were available at the time of this writing) compared to 2015 – that’s among the biggest increases in the state. Among towns with more than 20 homes sold in the first quarter, only Jamestown saw bigger growth, up 133%, and Narragansett matched the East Side’s increase. Other comparable markets weren’t even close: Barrington was only up 4% and Lincoln and East Greenwich were actually down.
These numbers track with a general surge in demand citywide, yet also stand apart from it. “Most of Providence is seeing a warming demand, with the East Side being absolutely on fire,” says Ken Schadegg of Lila Delman Real Estate. While he points to the West Side and Elmhurst as other neighborhoods seeing increased interest, the East Side’s surge dwarfed the city as a whole, which was only up 39%.
So what’s driving this off-the-charts housing boom? Like anything else, it’s a question of supply and demand – and the supply is low. “New inventory was scarce through most of the spring market so more buyers were competing for a smaller number of available properties,” explains Tim O’Keefe of Coldwell Banker Residential Brokerage.
There are only so many houses on the East Side and it’s not as if developers can just decide to put up more. This is Providence, not the Phoenix suburbs. The Northeast as a whole is a mature, densely populated market, with far less land for new construction. According to the National Association of Home Builders, the seasonally
adjusted annual rate of housing starts in the Northeast (which encompasses all of New England, plus New York, New Jersey and Pennsylvania) for May was 82,000, compared to 199,000 in the Midwest, 270,000 out West and a whopping 613,000 in the South.
With comparatively few new residences on the market, buyers are left to compete for those that are already here. “The bottom line is more people want to move to the East Side than want to leave,” Schadegg summarizes.
This means the houses that are available are moving at blink-and-you’ll-miss-it speeds: in the first quarter of this year, the average East Side home for sale spent 82 days on the market, a much quicker turnaround than the 115-day average in Narragansett or 167 in Jamestown. Agueda Del Borgo of Places & Spaces Realty observes “multiple-offer situations and [interested buyers] not having a chance to view a property appear to be the themes this season.” She recalls a situation earlier this summer in which she had multiple investor clients requesting to see a property in Wayland Square that had gone on the market just two days prior. They were already too late: there had been multiple offers and the attorney was reviewing a contract. O’Keefe seconds this: “Through most of April and May, new listings that were priced well and in good condition were getting multiple offers right away.”
Surprisingly, this hasn’t done as much to drive up prices as one might expect. The median price for the first quarter of 2016 was only up 6.6% on the East Side, while prices for the city as a whole shot up more than 17%. This is in line with the city’s state-mandated property revaluations earlier this year. While property values were up 9.45% citywide, the increases in Ward 1 (Fox Point and Downtown) and Ward 2 (Blackstone, College Hill and Wayland) were actually below average at 5.97% and 6.94% respectively. Ward 3 (Mount Hope and Summit) was the only one on the East Side that bested the citywide average at 10.22%. This means that the East Side is in the rare position of being a relative value buy compared to other Providence neighborhoods. Wards 5 (Elmhurst) and 13 (West Side and Federal Hill), for example, were up 11.31% and 11.8% respectively.
Of course, available housing is still only one half of the supply/demand equation. What accounts for the skyrocketing demand? After all, it’s not as if “the East Side is a really nice place to live” counts as news to anyone. There are a number of factors driving the stampede.
First off, Bishop believes it’s not necessarily a sudden uptick of new interest. “It’s pent-up demand,” he says. “It’s partly due to interest rates. People thought they were going to start changing, so they decided they needed to jump.” The interest rate hikes didn’t materialize and don’t appear to be on the horizon, but the possibility of them drove a significant enough amount of action to move the market.
Migration to Providence is another factor. “People are choosing to move here from larger cities and love the size of Providence,” says Sally Lapides of Residential Properties. While the East Side might seem expensive to Providence residents, people coming in from major metropolitan areas like Boston or New York see it as a relative steal. “We are seeing buyers who are getting priced out of the Boston market come down to Providence and find it as a great alternative within commuting distance,” says O’Keefe.
These buyers aren’t just making financial calculations either. Bargain prices wouldn’t mean anything to them if Providence couldn’t offer quality of life on par with other metros – and this is an area in which the East Side has a competitive advantage over other city neighborhoods. “The East Side allows people to feel very connected to the city but still enjoy a more suburban feel,” explains O’Keefe. Suburban feel, yes, but the East Side is decidedly not the suburbs, which adds to its appeal. “The East Side benefits from its very close proximity to desirable urban amenities – restaurants, theaters, museums and other cultural amenities not found in the suburbs,” says Schadegg. That balance puts 02906 in a sweet spot: unlike Downtown or the West Side, you can have a backyard and relative quiet, yet still remain close to the urban vibrancy you don’t get in comparably tony areas like Barrington or East Greenwich.
Providence’s recent “It City” buzz has also been a contributing factor. “There have been dozens of articles in national magazines and newspapers that are singing the praises of the quality of life in Providence,” says Lapides. From GQ calling it “America’s coolest city” to The New York Times ranking it one of “52 Places to Visit in 2016” alongside major world metropolises like Barcelona and exotic destinations like Argentina’s Road of the Seven Lakes, this good press has bolstered the Creative Capital’s standing. “More and more people recognize that Providence is a very vibrant, diverse and active city,” says O’Keefe.
Despite the good news, Providence is not without its problems. High property taxes are still a hindrance, even with the lower rates adopted in this year’s city budget. The decrease will not be enough to offset the increased property values, resulting in higher tax bills for many residents. Lapides largely shrugs off the impact on the East Side, noting, “I have not seen a flight of East Siders who are selling, nor have I seen clients repelled by our property taxes.” But Keith Fernandes, President of the Providence Apartment Association, believes the high taxes are keeping non-owner occupied buyers away. “There is not that much demand for multi-families from an investor point of view,” he says, but concedes that they remain an appealing option for some. “From an owner-occupied point of view it’s obvious. As buyers get priced out of the single-family market, they could be moving to the multi-families to help pay the mortgage.” He also worries that the tax bills will simply be passed on to renters. “Students will pay more, because landlords are paying more, because the city is demanding more.” He fears this could dissuade Millennials and recent graduates from staying in Providence.
Nonetheless, the East Side housing market remains bullish, and the feeding frenzy is bringing new brokers into the market. While familiar names like Residential Properties, Century 21, Coleman Realtors, Spitz Weiss Realtors, William Raveis and E.F. Bishop still adorn many of the sale signs throughout the East Side, names like Lila Delman and Mott & Chace are popping up more often. “The East Side market is obviously desirable, making it an ideal central location for highly successful regional real estate agencies seeking expansion opportunities,” says Schadegg of Lila Delman, which is typically associated with multi-million dollar coastal properties.
“Establishing a presence in a hot market is a savvy business move,” agrees Del Borco of Places & Spaces, which has been operating on the East Side since 2008.
Right now, the East Side might just be the hottest market of them all.