COST OF LIVING: Karl Martone, a broker associate with Re/Max Properties in Smithfield, says he sees some improvement in the local housing market, but the cost of land and building roads and a lengthy planning process make homes costing less than $300,000 hard to come by.
Tim Grenier, owner of the Grenier Group in East Greenwich, is trying to fill out a Warwick Neck 8-lot subdivision by building a house or two at a time and using his own money to do it.
A lender had financed the land acquisition but finding traditional financing for construction has proved difficult, Grenier says, and though he is a builder, not a developer, he says colleagues in construction are struggling to find financing, too.
Before the recession hit, Grenier used to build “on spec,” or speculation, a common practice, borrowing money from lenders and repaying the loan once the houses sold. That type of approach to new construction is still done, but Realtors in Rhode Island say the financing for building on spec is harder to come by not only here but across the country.
Today referring to himself as a “custom builder” who erects homes to order, Grenier only constructs a handful of homes a year and is marketing $550,000 shingle-style cottages in Warwick to the empty nester. His open houses are attracting qualified, prospective buyers but the high unemployment rate in Rhode Island and the troubled economy continue to make him skittish about the market.
“I don’t want to be a ‘spec’ builder ever again,” he said. “The risk is too great. The money is not available. Used to be, you could get 100 percent of the cost of a project from a lender, but it’s much more difficult to make a bank agree to give you a substantial portion of something that is not [yet] sold, because they know it’s going to take a long time to sell, and possibly not sell.”
By June, Rhode Island’s unemployment rate, at 7.9 percent, was tied with Mississippi for the highest in the country, according to the U.S. Department of Labor’s Bureau of Labor Statistics. According to the U.S. Census Bureau, Rhode Island’s population dropped by 1,056 people, to 1,051,511, between April 2010 and the same month last year, the most recent period available.
None of that bodes well for improvements in the single-unit housing market, and while there are incremental improvements, Rhode Island is doing poorly compared to pre-recession standards, says Leonard Lardaro, a University of Rhode Island economist.
Lardaro compiles a monthly Current Conditions Index that records economic momentum. According to the most recent CCI for May, single-use permits increased year over year by 9 percent, but those 70 or 75 permits pulled in a month’s time remain far below pre-recession levels of 125 permits a month, he said.