Low Six Figure Homes Remain Strongest Part of Newport Market

Single family homes in the low six figures are the section of real estate that continues to grow in the Newport area.

Numbers released for sales in the second quarter and year to date have been showing a decrease in closings on Aquidneck Island, with a rise in sale prices in recent months.

Vincent Marcello of Bellevue Realtors in Newport said the year to date figures show a total of 347 closings in Newport, Middletown and Portsmouth, with the average sales price being $400,000, according to figures released by the Rhode Island Multiple Listings Service. The number represents a decrease from 431 closings during the same time in 2007, before the burst of the housing bubble. Marcello said the 2007 sale prices were $579,000 on average.

Matt Phipps, a Newport resident and broker with Phipps Realty in Warwick, said the MLS figures for the second quarter show 41 closings in Newport during that time, a 15 percent decrease from 48 in the second quarter of 2009. At the same time though, Phipps said the numbers show a rise in sale prices in the quarter from $340,000 in 2009 to $365,000 in 2010.

Phipps attributes the price rise in Newport, along with the drop in closings, to the decrease in short sales in the city.

"There were less distress sales," he said. "There were only five short sales compared to 12 in the year before."

Realtors said the lower end of the market has been the main growth area as families look to purchase a single family home as a primary residence and as an entry level second home. The combination of low prices and low interest rates, realtors said, is what's fueling the rise in sales in the low six figure category.

"It is the perfect storm," said Melanie Delman of Lia Delman Real Estate in Newport.

Delman said many of the vacation home buyers are seeing the current market as a time when they can buy into the Newport summer lifestyle at a lower price than in past years. While many of the buyers have been hailing from Rhode Island, others have been headed to Newport from Boston, Connecticut, New York and New Jersey.

"Newport has a strong second home buyers market," Phipps said.

Connor Dowd, a broker with Keller Williams in Newport, said the primary buyers for the second homes in the lower end of the price range have primarily been people in their 30s who are from outside of Rhode Island.

While the lower end of the market has been strong, realtors said the luxury market has continued to lag behind, falling victim to the lasting recession and problems on Wall Street. The drop in Wall Street bonuses in recent years has hurt the luxury home market, particularly on second or third home purchases. The trend is similar to Manhattan and New York metro area suburban real estate, which saw a decrease after the bonus drop on Wall Street.

Marcello said the MLS data shows 14 sales for over a million dollars on the island year to date, compared to 26 on the island for the same period in 2007.

"The market over a million is not dead, but it is not what it used to be," he said. "I'm still seeing buyers from out of state in the upper range, but not as many. There were a lot of Wall Street types."

Delman said she has seen a continued interest in the luxury market, particularly for those seeking a second or third home, or who are hoping to set up a home base in New England in the future. She said she has younger buyers seeking a Newport home for a summer residence and others who are looking to buy a weekend place in Newport to enjoy the year-round recreational activities.

"The yachting starts it," she said.

In addition to the younger buyers seeking recreational homes in Newport, Delman said others include parents with college-age children who are looking to provide a home base in the region during the college years.

Phipps, the immediate past communication chairman of the National Association of Realtors, said the Newport area remains different from the rest of Rhode Island due to the lower amount of housing stock and the vacation home market on the island fueling real estate sales. He said statewide figures for the second quarter show a 10 percent increase in closings and a nine percent increase in sales price. He said the data also shows that there is a 20 percent drop in distressed and short sales on a statewide basis.

Phipps, the co-creator of real estate segments on ABC6 and Fox Providence, said part of the statewide drop in short sales in the second quarter is based on it coinciding with the end of the first time homebuyers tax credit. He said part of the issue was that the short time period for the tax credit led many first time buyers to decline to go through the longer period of time that is needed to purchase a short sale.

Realtors said they expect real estate on the island to continue to remain strong for the remainder of the year and looking ahead to 2011. That said, they noted the market will likely not bounce back to the height of the real estate boom, witnessed during the middle part of the decade.

"I think we're in a flat market," Dowd said. "Prices will hold where they are. Prices will not go up in the next two to three years. The market will not take off in the way it did. It will not climb in the fashion that it did."