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Rhode Island Real Estate
I hear the term "sub-prime crisis" a lot lately in the media and this so-called crises, brought on by the manipulation of lenders, affects all home-owners and potential home owners. Rhode Island holds the third largest exposure to sub-prime loans in the country, behind New York and California. Compare the populations of New York and California with Rhode Island's and you have an idea of the impact of this data. They say "third largest" not "3rd largest percentage" which in statistics means a great deal. If the smallest state has the 3rd largest exposure, by number, not percentage, that is incredible.
In the sub-prime market speculative lenders offered mortgages to borrowers with less than good credit ratings, often at high interest rates, variable rates, and no money down programs. They then sold the loans packaged as securities to Wall Street. Some sub-prime lenders have filed for bankruptcy while their principals have walked away with billions of dollars.
Some borrowers, those who bought more expensive homes than they could really afford, or who took variable rate loans hoping to re-finance to a fixed rate when their home appreciated, got caught in the squeeze when the housing market hit a slump, housing prices stagnated and then dropped making a pronounced dent in available equity. People who hoped to use equity in their homes and found out they had none, or those who drew too much equity out of their property found themselves in a bind. Across the country foreclosures are way up and they are way up in Rhode Island as well.
ProJo features an article on the impact of the sup-prime crisis in Rhode Island in Sunday's paper. Click the link below to access the article.
When a link to an article in ProJo or the Globe or the Times appears you may have to register and provide a user-name and a password: the sign up process takes only a minute and is well worth the small effort to access the articles.
A related article in ProJo's Real Estate Section
Do sellers need to rein in expectations
deals with the slump in the housing market and offers stats about sales and median house prices. The article posits that home owners wishing to sell their homes still think of their homes as having the same value as they had in 2004 and 2005 when the Real Estate market was peaking.
Truth is the market fluctuates neighborhood by neighborhood. The high end East Side market has taken the biggest hit as far as falling home values as registered by percentage, in my opinion, while in Mt. Hope, the biggest losers are those investors who bought at the very top of the market expecting more appreciation and high rents. They have been the victims of both falling resale value and a more competitive rental market that left overpriced rental units empty.
A number of foreclosures have taken place in Mt. Hope including houses on Camp Street, Peach Street, and Pleasant Street. There must be more that I am not aware of, and I'm sure there are more to come.
John Twomey
Posted at May 6, 2007 10:48 PM
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