2014 Year-End Annual Report for Multi-Family Homes on Providence’s East Side
Multi-family home sales showed improvement in 2014 but at a very very slow rate. The bright spot for 2014 was that the median price improved 12% over 2013 to $340,000, which is the highest since 2007. Two high sales, both on Benefit Street (257 Benefit – $1,625,000 and 314 Benefit – $1,450,000) show a blink of investment potential for the 4-unit+ segment. Of note, these buildings were purchased for rental, not condo conversion. The bulk, 66%, of all sales were in the $200,000-$399,000 range. We observed many owner-occupants purchasing. The investor market for the small multi-family homes it all but dead save for a couple in the 4 unit+ market where the number of units and resulting incomes have the only chance of offsetting Providence’s unfavorable, non-owner occupied tax rates.
East Side Multi-Family Homes: Median Sales Price
The median sales price for East Side multi-family homes was $340,000, up 12%% vs. $304,50 in 2013. For reference, compare this to the height of the market in 2005 when the median sales price was $429,500. We are now 21% off the peak.
East Side Multi-Family Homes: Number of Sales
There were 53 sales of East Side multi-family homes, down 22% vs. the prior year. This is better than the lows of 2008 and 2010 when there were only 42 sales but far off 10 years ago when there were 162 sales of multi-family homes on the East Side. That inventory was mainly converted into condominiums during the boom years.
East Side Multi-Family Homes: Days on the Market
Multi-family homes averaged 97 days on market, a far cry from the 40-day-averages and multi-bid situations of 2004 when the multi-family homes got gobbled up for condo conversions.
East Side Multi-Family Homes: Price-Per-Square-Foot
The median price-per-square-foot in 2014 was $120, up from $102 in 2013. The median price-per-square-foot has remained within the $212 – $120 range since 2008.
East Side Multi-Family Homes: Sales Prices
The highest priced sale this year was at 257 Benefit Street for $1,625.000. This was a 4 unit home on Atheneum Row, right next door to the Providence Athenaeum. An iconic townhouse right across from the courthouse, this sale goes to prove the old adage: location, location, location. Ditto for the sale of the General Burnside house across from the John Brown House for $1,450,000.
Despite these two outliers above, the bulk of sales for East Side multi-family homes fell squarely in the $200,000 – $399,000 price segment. The majority of these properties were purchased for owner-occupancy with offsetting rental income vs. investment income.
There was only one sale of a multi-family property under $200,000: 32 Royal Street, which sold for $195,000. The bargains of the last few years have all but gone. However, multi-family homes, with their low price-per-square-foot, combined with low interest rates and the ability to offset one’s mortgage with supplemental rental income, are a good buy on the East Side right now.
East Side Multi-Family Homes: Interest Rates
Interest rates for 30-year-fixed reached their lowest point in history in March, 2013, then ticked up early in 2014 then despite predictions have fallen to 19 month lows. Contributing to this is the Fed’s concern over the lack of income growth in the economy. As of this writing, 30-year-fixed rates are 3.71%. Predictions for 2015 have rates moving up. Only time and the economy will tell for this wild card. For now, interest rates are extremely favorable, adding to buyer’s purchasing power.
East Side Multi-Family Homes: Property Taxes
Providence’s total taxes (including car tax) are the second highest in the state of Rhode Island and represent 13.2% of median income. Despite the lower re-evaluations, the tax rates have increased and effectively they are the highest they have ever been. 2013 marked the first year of the elimination of the homestead exemption (or 50% less tax rate) for owner-occupancy and the establishment of 2 separate rates: one for owner occupied and non owner occupied. Providence is the largest city in the smallest state and a hard place to be in with tax-exempt colleges and hospitals. We do not foresee a break in property taxes any time soon.
Multi-Family Homes: What to Expect for 2015?
For multi-family homes on the East Side of Providence, 2014 will be remembered as the return of the “owner-occupant”. The investor market has been dead for quite some time.
Echoing what was said above, with interest rates at a now 19-month-low, few buyers in the market, and relatively low prices per square foot, multi-family properties present a good opportunity right now. It could be a very smart financial decision to purchase an owner-occupied multi-family property to offset one’s mortgage, have supplemental rental income and gain tax breaks. Whether or not landlording is something that appeals to you may be the key in your decision to purchase.
Vacant Land & Foreclosures: 2014 Year-End Analysis
Vacant Land: There were only 2 sales of vacant land on the East Side of Providence in 2014. This seems to be a hot commodity since there is so little available. The highest sale was at 117 Loring with raw land selling for $450,000, and a lot at 52 Harwich that sold for $425,000.
Foreclosures: Among all property classes, there were only 7 bank-owned properties conveyed through MLS: 2 single families and 5 condos. This is the lowest amount since 2009. Foreclosures are few and far between on the East Side. Those that do go into foreclosure are sometimes purchased at auction and never make it into MLS for tracking. However, this market is minuscule on the East Side as property values and ownership remain stable.